Correlation Between Haier Smart and HomeToGo

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

By analyzing existing cross correlation between Haier Smart Home and HomeToGo SE, you can compare the effects of market volatilities on Haier Smart and HomeToGo 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 Haier Smart with a short position of HomeToGo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haier Smart and HomeToGo.

Diversification Opportunities for Haier Smart and HomeToGo

0.46

Correlation Coefficient

Haier Smart  HomeToGo

Very weak diversification

The 3 months correlation between Haier and HomeToGo is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Haier Smart Home and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE and Haier Smart 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 Haier Smart Home are associated (or correlated) with HomeToGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeToGo SE has no effect on the direction of Haier Smart i.e., Haier Smart and HomeToGo go up and down completely randomly.

Pair Corralation between Haier Smart and HomeToGo

Assuming the 90 days trading horizon Haier Smart is expected to generate 1.36 times less return on investment than HomeToGo. But when comparing it to its historical volatility, Haier Smart Home is 1.23 times less risky than HomeToGo. It trades about 0.11 of its potential returns per unit of risk. HomeToGo SE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  180.00  in HomeToGo SE on September 5, 2024 and sell it today you would earn a total of  37.00  from holding HomeToGo SE or generate 20.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Haier Smart Home  vs.  HomeToGo SE

Haier Smart Home

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Haier Smart unveiled solid returns over the last few months and may actually be approaching a breakup point.

HomeToGo SE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HomeToGo SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, HomeToGo unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haier Smart and HomeToGo

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

The idea behind Haier Smart Home and HomeToGo SE 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 Stocks Directory module to find actively traded stocks across global markets.