Correlation Between Homeritz Bhd and Tex Cycle

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

By analyzing existing cross correlation between Homeritz Bhd and Tex Cycle Technology, you can compare the effects of market volatilities on Homeritz Bhd and Tex Cycle 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 Homeritz Bhd with a short position of Tex Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Homeritz Bhd and Tex Cycle.

Diversification Opportunities for Homeritz Bhd and Tex Cycle

0.66

Correlation Coefficient

Homeritz Bhd  Tex Cycle

Poor diversification

The 3 months correlation between Homeritz and Tex is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Homeritz Bhd and Tex Cycle Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tex Cycle Technology and Homeritz Bhd 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 Homeritz Bhd are associated (or correlated) with Tex Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tex Cycle Technology has no effect on the direction of Homeritz Bhd i.e., Homeritz Bhd and Tex Cycle go up and down completely randomly.

Pair Corralation between Homeritz Bhd and Tex Cycle

Assuming the 90 days trading horizon Homeritz Bhd is expected to generate 1.62 times more return on investment than Tex Cycle. However, Homeritz Bhd is 1.62 times more volatile than Tex Cycle Technology. It trades about 0.07 of its potential returns per unit of risk. Tex Cycle Technology is currently generating about -0.4 per unit of risk. If you would invest  58.00  in Homeritz Bhd on October 9, 2024 and sell it today you would earn a total of  1.00  from holding Homeritz Bhd or generate 1.72% return on investment over 90 days.

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

Homeritz Bhd  vs.  Tex Cycle Technology

Homeritz Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homeritz Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Homeritz Bhd is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Tex Cycle Technology

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Tex Cycle Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Tex Cycle is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Homeritz Bhd and Tex Cycle

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

The idea behind Homeritz Bhd and Tex Cycle Technology 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.