Correlation Between GungHo Online and HomeToGo

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

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

Diversification Opportunities for GungHo Online and HomeToGo

0.62

Correlation Coefficient

GungHo Online  HomeToGo

Poor diversification

The 3 months correlation between GungHo and HomeToGo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding GungHo Online Entertainment and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE and GungHo Online 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 GungHo Online Entertainment 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 GungHo Online i.e., GungHo Online and HomeToGo go up and down completely randomly.

Pair Corralation between GungHo Online and HomeToGo

Assuming the 90 days horizon GungHo Online Entertainment is expected to under-perform the HomeToGo. But the stock apears to be less risky and, when comparing its historical volatility, GungHo Online Entertainment is 1.07 times less risky than HomeToGo. The stock trades about -0.04 of its potential returns per unit of risk. The HomeToGo SE is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  195.00  in HomeToGo SE on December 29, 2024 and sell it today you would lose (13.00) from holding HomeToGo SE or give up 6.67% of portfolio value over 90 days.

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

GungHo Online Entertainment  vs.  HomeToGo SE

GungHo Online Entert

Risk-Adjusted Performance

Very Weak

Over the last 90 days GungHo Online Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GungHo Online is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

HomeToGo SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days HomeToGo SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, HomeToGo is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GungHo Online and HomeToGo

The main advantage of trading using opposite GungHo Online and HomeToGo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GungHo Online 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 GungHo Online Entertainment 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.