Correlation Between Homeritz Bhd and XL Holdings

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

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

Diversification Opportunities for Homeritz Bhd and XL Holdings

0.15

Correlation Coefficient

Homeritz Bhd  XL Holdings

Average diversification

The 3 months correlation between Homeritz and 7121 is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Homeritz Bhd and XL Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XL Holdings Bhd 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 XL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XL Holdings Bhd has no effect on the direction of Homeritz Bhd i.e., Homeritz Bhd and XL Holdings go up and down completely randomly.

Pair Corralation between Homeritz Bhd and XL Holdings

Assuming the 90 days trading horizon Homeritz Bhd is expected to generate 1.94 times more return on investment than XL Holdings. However, Homeritz Bhd is 1.94 times more volatile than XL Holdings Bhd. It trades about 0.08 of its potential returns per unit of risk. XL Holdings Bhd is currently generating about -0.06 per unit of risk. If you would invest  53.00  in Homeritz Bhd on October 3, 2024 and sell it today you would earn a total of  6.00  from holding Homeritz Bhd or generate 11.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Homeritz Bhd  vs.  XL Holdings Bhd

Homeritz Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Homeritz Bhd are ranked lower than 6 (%) 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.

XL Holdings Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XL Holdings Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, XL Holdings 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 XL Holdings

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

The idea behind Homeritz Bhd and XL Holdings Bhd 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.