Correlation Between Neinor Homes and Inchcape Plc

Can any of the company-specific risk be diversified away by investing in both Neinor Homes and Inchcape Plc 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 Inchcape Plc 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 Inchcape plc, you can compare the effects of market volatilities on Neinor Homes and Inchcape Plc 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 Inchcape Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neinor Homes and Inchcape Plc.

Diversification Opportunities for Neinor Homes and Inchcape Plc

-0.23

Correlation Coefficient

Neinor Homes  Inchcape Plc

Very good diversification

The 3 months correlation between Neinor and Inchcape is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SA and Inchcape plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inchcape plc 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 Inchcape Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inchcape plc has no effect on the direction of Neinor Homes i.e., Neinor Homes and Inchcape Plc go up and down completely randomly.

Pair Corralation between Neinor Homes and Inchcape Plc

Assuming the 90 days trading horizon Neinor Homes SA is expected to generate 0.98 times more return on investment than Inchcape Plc. However, Neinor Homes SA is 1.02 times less risky than Inchcape Plc. It trades about -0.04 of its potential returns per unit of risk. Inchcape plc is currently generating about -0.06 per unit of risk. If you would invest  1,474  in Neinor Homes SA on December 30, 2024 and sell it today you would lose (98.00) from holding Neinor Homes SA or give up 6.65% of portfolio value over 90 days.

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

Neinor Homes SA  vs.  Inchcape plc

Neinor Homes SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neinor Homes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Neinor Homes is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Inchcape plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inchcape plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Neinor Homes and Inchcape Plc

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

The idea behind Neinor Homes SA and Inchcape plc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.