Correlation Between Home Center and Miwon Chemicals

Can any of the company-specific risk be diversified away by investing in both Home Center and Miwon Chemicals 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 Miwon Chemicals 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 Miwon Chemicals Co, you can compare the effects of market volatilities on Home Center and Miwon Chemicals 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 Miwon Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Center and Miwon Chemicals.

Diversification Opportunities for Home Center and Miwon Chemicals

0.46

Correlation Coefficient

Home Center  Miwon Chemicals

Very weak diversification

The 3 months correlation between Home and Miwon is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Home Center Holdings and Miwon Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miwon Chemicals 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 Miwon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miwon Chemicals has no effect on the direction of Home Center i.e., Home Center and Miwon Chemicals go up and down completely randomly.

Pair Corralation between Home Center and Miwon Chemicals

Assuming the 90 days trading horizon Home Center Holdings is expected to under-perform the Miwon Chemicals. In addition to that, Home Center is 4.2 times more volatile than Miwon Chemicals Co. It trades about -0.13 of its total potential returns per unit of risk. Miwon Chemicals Co is currently generating about -0.09 per unit of volatility. If you would invest  8,000,000  in Miwon Chemicals Co on September 3, 2024 and sell it today you would lose (310,000) from holding Miwon Chemicals Co or give up 3.87% of portfolio value over 90 days.

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

Home Center Holdings  vs.  Miwon Chemicals Co

Home Center Holdings

Risk-Adjusted Performance

0 of 100

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Miwon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Miwon Chemicals Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Miwon Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Home Center and Miwon Chemicals

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

The idea behind Home Center Holdings and Miwon Chemicals Co 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.

Check out your portfolio center.

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.