Correlation Between Home Center and ChipsMedia

Can any of the company-specific risk be diversified away by investing in both Home Center and ChipsMedia 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 Home Center and ChipsMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Center Holdings and ChipsMedia, you can compare the effects of market volatilities on Home Center and ChipsMedia 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 Home Center with a short position of ChipsMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Center and ChipsMedia.

Diversification Opportunities for Home Center and ChipsMedia

0.67

Correlation Coefficient

Home Center  ChipsMedia

Poor diversification

The 3 months correlation between Home and ChipsMedia is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Home Center Holdings and ChipsMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChipsMedia and Home Center 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 Home Center Holdings are associated (or correlated) with ChipsMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChipsMedia has no effect on the direction of Home Center i.e., Home Center and ChipsMedia go up and down completely randomly.

Pair Corralation between Home Center and ChipsMedia

Assuming the 90 days trading horizon Home Center Holdings is expected to under-perform the ChipsMedia. But the stock apears to be less risky and, when comparing its historical volatility, Home Center Holdings is 2.39 times less risky than ChipsMedia. The stock trades about -0.43 of its potential returns per unit of risk. The ChipsMedia is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,485,000  in ChipsMedia on December 25, 2024 and sell it today you would earn a total of  381,000  from holding ChipsMedia or generate 25.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.21%
Values	Daily Returns

Home Center Holdings  vs.  ChipsMedia

Home Center Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Center Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ChipsMedia

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChipsMedia are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ChipsMedia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Center and ChipsMedia

The main advantage of trading using opposite Home Center and ChipsMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Center position performs unexpectedly, ChipsMedia 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 ChipsMedia will offset losses from the drop in ChipsMedia's long position.

The idea behind Home Center Holdings and ChipsMedia 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.