Correlation Between HomeChoice Investments and Famous Brands

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

By analyzing existing cross correlation between HomeChoice Investments and Famous Brands, you can compare the effects of market volatilities on HomeChoice Investments and Famous Brands 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 HomeChoice Investments with a short position of Famous Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeChoice Investments and Famous Brands.

Diversification Opportunities for HomeChoice Investments and Famous Brands

-0.73

Correlation Coefficient

HomeChoice Investments  Famous Brands

Pay attention - limited upside

The 3 months correlation between HomeChoice and Famous is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and Famous Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Famous Brands and HomeChoice Investments 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 HomeChoice Investments are associated (or correlated) with Famous Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Famous Brands has no effect on the direction of HomeChoice Investments i.e., HomeChoice Investments and Famous Brands go up and down completely randomly.

Pair Corralation between HomeChoice Investments and Famous Brands

Assuming the 90 days trading horizon HomeChoice Investments is expected to under-perform the Famous Brands. In addition to that, HomeChoice Investments is 1.94 times more volatile than Famous Brands. It trades about -0.12 of its total potential returns per unit of risk. Famous Brands is currently generating about 0.08 per unit of volatility. If you would invest  635,400  in Famous Brands on September 29, 2024 and sell it today you would earn a total of  42,500  from holding Famous Brands or generate 6.69% return on investment over 90 days.

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

HomeChoice Investments  vs.  Famous Brands

HomeChoice Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeChoice Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Famous Brands

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Famous Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Famous Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HomeChoice Investments and Famous Brands

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

The idea behind HomeChoice Investments and Famous Brands 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.