Correlation Between Homeco Daily and OD6 Metals

Can any of the company-specific risk be diversified away by investing in both Homeco Daily and OD6 Metals 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 Homeco Daily and OD6 Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Homeco Daily Needs and OD6 Metals, you can compare the effects of market volatilities on Homeco Daily and OD6 Metals 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 Homeco Daily with a short position of OD6 Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Homeco Daily and OD6 Metals.

Diversification Opportunities for Homeco Daily and OD6 Metals

0.01

Correlation Coefficient

Homeco Daily  OD6 Metals

Significant diversification

The 3 months correlation between Homeco and OD6 is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Homeco Daily Needs and OD6 Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OD6 Metals and Homeco Daily 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 Homeco Daily Needs are associated (or correlated) with OD6 Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OD6 Metals has no effect on the direction of Homeco Daily i.e., Homeco Daily and OD6 Metals go up and down completely randomly.

Pair Corralation between Homeco Daily and OD6 Metals

Assuming the 90 days trading horizon Homeco Daily Needs is expected to under-perform the OD6 Metals. But the stock apears to be less risky and, when comparing its historical volatility, Homeco Daily Needs is 5.95 times less risky than OD6 Metals. The stock trades about -0.04 of its potential returns per unit of risk. The OD6 Metals is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  3.20  in OD6 Metals on October 6, 2024 and sell it today you would earn a total of  2.00  from holding OD6 Metals or generate 62.5% return on investment over 90 days.

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

Homeco Daily Needs  vs.  OD6 Metals

Homeco Daily Needs

Risk-Adjusted Performance

0 of 100

Very Weak

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

OD6 Metals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OD6 Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, OD6 Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Homeco Daily and OD6 Metals

The main advantage of trading using opposite Homeco Daily and OD6 Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Homeco Daily position performs unexpectedly, OD6 Metals 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 OD6 Metals will offset losses from the drop in OD6 Metals' long position.

The idea behind Homeco Daily Needs and OD6 Metals 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.