Correlation Between E For and Home Pottery

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

By analyzing existing cross correlation between E for L and Home Pottery Public, you can compare the effects of market volatilities on E For and Home Pottery 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 E For with a short position of Home Pottery. Check out your portfolio center. Please also check ongoing floating volatility patterns of E For and Home Pottery.

Diversification Opportunities for E For and Home Pottery

0.21

Correlation Coefficient

E For  Home Pottery

Modest diversification

The 3 months correlation between EFORL and Home is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding E for L and Home Pottery Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Pottery Public and E For 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 E for L are associated (or correlated) with Home Pottery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Pottery Public has no effect on the direction of E For i.e., E For and Home Pottery go up and down completely randomly.

Pair Corralation between E For and Home Pottery

Assuming the 90 days trading horizon E for L is expected to under-perform the Home Pottery. In addition to that, E For is 1.69 times more volatile than Home Pottery Public. It trades about -0.19 of its total potential returns per unit of risk. Home Pottery Public is currently generating about -0.03 per unit of volatility. If you would invest  46.00  in Home Pottery Public on December 29, 2024 and sell it today you would lose (3.00) from holding Home Pottery Public or give up 6.52% of portfolio value over 90 days.

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

E for L  vs.  Home Pottery Public

E for L

Risk-Adjusted Performance

Very Weak

Over the last 90 days E for L has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Home Pottery Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Pottery Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Home Pottery 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 E For and Home Pottery

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

The idea behind E for L and Home Pottery Public 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.