Correlation Between Homeritz Bhd and Scientex Packaging

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

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

Diversification Opportunities for Homeritz Bhd and Scientex Packaging

0.15

Correlation Coefficient

Homeritz Bhd  Scientex Packaging

Average diversification

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

Pair Corralation between Homeritz Bhd and Scientex Packaging

Assuming the 90 days trading horizon Homeritz Bhd is expected to generate 0.37 times more return on investment than Scientex Packaging. However, Homeritz Bhd is 2.74 times less risky than Scientex Packaging. It trades about -0.02 of its potential returns per unit of risk. Scientex Packaging is currently generating about -0.06 per unit of risk. If you would invest  57.00  in Homeritz Bhd on December 26, 2024 and sell it today you would lose (1.00) from holding Homeritz Bhd or give up 1.75% of portfolio value over 90 days.

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

Homeritz Bhd  vs.  Scientex Packaging

Homeritz Bhd

Risk-Adjusted Performance

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.

Scientex Packaging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scientex Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Homeritz Bhd and Scientex Packaging

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

The idea behind Homeritz Bhd and Scientex Packaging 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.