Correlation Between Homeritz Bhd and Carlsberg Brewery

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

By analyzing existing cross correlation between Homeritz Bhd and Carlsberg Brewery Malaysia, you can compare the effects of market volatilities on Homeritz Bhd and Carlsberg Brewery 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 Carlsberg Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Homeritz Bhd and Carlsberg Brewery.

Diversification Opportunities for Homeritz Bhd and Carlsberg Brewery

0.56

Correlation Coefficient

Homeritz Bhd  Carlsberg Brewery

Very weak diversification

The 3 months correlation between Homeritz and Carlsberg is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Homeritz Bhd and Carlsberg Brewery Malaysia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg Brewery 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 Carlsberg Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg Brewery has no effect on the direction of Homeritz Bhd i.e., Homeritz Bhd and Carlsberg Brewery go up and down completely randomly.

Pair Corralation between Homeritz Bhd and Carlsberg Brewery

Assuming the 90 days trading horizon Homeritz Bhd is expected to generate 1.88 times more return on investment than Carlsberg Brewery. However, Homeritz Bhd is 1.88 times more volatile than Carlsberg Brewery Malaysia. It trades about 0.16 of its potential returns per unit of risk. Carlsberg Brewery Malaysia is currently generating about 0.07 per unit of risk. If you would invest  53.00  in Homeritz Bhd on October 25, 2024 and sell it today you would earn a total of  7.00  from holding Homeritz Bhd or generate 13.21% return on investment over 90 days.

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

Homeritz Bhd  vs.  Carlsberg Brewery Malaysia

Homeritz Bhd

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Homeritz Bhd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Homeritz Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Carlsberg Brewery

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg Brewery Malaysia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Carlsberg Brewery 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 Carlsberg Brewery

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

The idea behind Homeritz Bhd and Carlsberg Brewery Malaysia 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.