Correlation Between Neinor Homes and Far East

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

By analyzing existing cross correlation between Neinor Homes SA and Far East Horizon, you can compare the effects of market volatilities on Neinor Homes and Far East 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 Neinor Homes with a short position of Far East. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neinor Homes and Far East.

Diversification Opportunities for Neinor Homes and Far East

0.67

Correlation Coefficient

Neinor Homes  Far East

Poor diversification

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

Pair Corralation between Neinor Homes and Far East

Assuming the 90 days trading horizon Neinor Homes is expected to generate 1.25 times less return on investment than Far East. But when comparing it to its historical volatility, Neinor Homes SA is 2.9 times less risky than Far East. It trades about 0.09 of its potential returns per unit of risk. Far East Horizon is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  41.00  in Far East Horizon on October 4, 2024 and sell it today you would earn a total of  23.00  from holding Far East Horizon or generate 56.1% return on investment over 90 days.

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

Neinor Homes SA  vs.  Far East Horizon

Neinor Homes SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Neinor Homes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Far East Horizon

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Neinor Homes and Far East

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

The idea behind Neinor Homes SA and Far East Horizon 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.