Correlation Between Homeritz Bhd and Central Industrial

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

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

Diversification Opportunities for Homeritz Bhd and Central Industrial

0.77

Correlation Coefficient

Homeritz Bhd  Central Industrial

Poor diversification

The 3 months correlation between Homeritz and Central is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Homeritz Bhd and Central Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Industrial Corp 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 Central Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Industrial Corp has no effect on the direction of Homeritz Bhd i.e., Homeritz Bhd and Central Industrial go up and down completely randomly.

Pair Corralation between Homeritz Bhd and Central Industrial

Assuming the 90 days trading horizon Homeritz Bhd is expected to generate 1.36 times more return on investment than Central Industrial. However, Homeritz Bhd is 1.36 times more volatile than Central Industrial Corp. It trades about 0.16 of its potential returns per unit of risk. Central Industrial Corp is currently generating about 0.12 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	Significant
Accuracy	100.0%
Values	Daily Returns

Homeritz Bhd  vs.  Central Industrial Corp

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.

Central Industrial Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Industrial Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Central Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Homeritz Bhd and Central Industrial

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

The idea behind Homeritz Bhd and Central Industrial Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.