Correlation Between Global Fashion and HomeToGo

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

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

Diversification Opportunities for Global Fashion and HomeToGo

0.58

Correlation Coefficient

Global Fashion  HomeToGo

Very weak diversification

The 3 months correlation between Global and HomeToGo is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Global Fashion Group and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE and Global Fashion 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 Global Fashion Group 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 Global Fashion i.e., Global Fashion and HomeToGo go up and down completely randomly.

Pair Corralation between Global Fashion and HomeToGo

Assuming the 90 days trading horizon Global Fashion Group is expected to generate 1.37 times more return on investment than HomeToGo. However, Global Fashion is 1.37 times more volatile than HomeToGo SE. It trades about -0.04 of its potential returns per unit of risk. HomeToGo SE is currently generating about -0.06 per unit of risk. If you would invest  26.00  in Global Fashion Group on October 24, 2024 and sell it today you would lose (4.00) from holding Global Fashion Group or give up 15.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Global Fashion Group  vs.  HomeToGo SE

Global Fashion Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Fashion Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

HomeToGo SE

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Global Fashion and HomeToGo

The main advantage of trading using opposite Global Fashion and HomeToGo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Fashion 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 Global Fashion Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.