Correlation Between DO Home and Hunan Mendale

Can any of the company-specific risk be diversified away by investing in both DO Home and Hunan Mendale at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DO Home and Hunan Mendale into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DO Home Collection and Hunan Mendale Hometextile, you can compare the effects of market volatilities on DO Home and Hunan Mendale and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DO Home with a short position of Hunan Mendale. Check out your portfolio center. Please also check ongoing floating volatility patterns of DO Home and Hunan Mendale.

Diversification Opportunities for DO Home and Hunan Mendale

0.96

Correlation Coefficient

DO Home  Hunan Mendale

Almost no diversification

The 3 months correlation between 002798 and Hunan is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding DO Home Collection and Hunan Mendale Hometextile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Mendale Hometextile and DO Home is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DO Home Collection are associated (or correlated) with Hunan Mendale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Mendale Hometextile has no effect on the direction of DO Home i.e., DO Home and Hunan Mendale go up and down completely randomly.

Pair Corralation between DO Home and Hunan Mendale

Assuming the 90 days trading horizon DO Home Collection is expected to under-perform the Hunan Mendale. In addition to that, DO Home is 1.02 times more volatile than Hunan Mendale Hometextile. It trades about -0.03 of its total potential returns per unit of risk. Hunan Mendale Hometextile is currently generating about -0.02 per unit of volatility. If you would invest  485.00  in Hunan Mendale Hometextile on October 4, 2024 and sell it today you would lose (191.00) from holding Hunan Mendale Hometextile or give up 39.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

DO Home Collection  vs.  Hunan Mendale Hometextile

DO Home Collection

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DO Home Collection are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DO Home may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hunan Mendale Hometextile

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Mendale Hometextile are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Mendale sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DO Home and Hunan Mendale

The main advantage of trading using opposite DO Home and Hunan Mendale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DO Home position performs unexpectedly, Hunan Mendale can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hunan Mendale will offset losses from the drop in Hunan Mendale's long position.

The idea behind DO Home Collection and Hunan Mendale Hometextile pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.