Correlation Between HomeChoice Investments and Sygnia

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

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

Diversification Opportunities for HomeChoice Investments and Sygnia

0.12

Correlation Coefficient

HomeChoice Investments  Sygnia

Average diversification

The 3 months correlation between HomeChoice and Sygnia is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and Sygnia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sygnia 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 Sygnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sygnia has no effect on the direction of HomeChoice Investments i.e., HomeChoice Investments and Sygnia go up and down completely randomly.

Pair Corralation between HomeChoice Investments and Sygnia

Assuming the 90 days trading horizon HomeChoice Investments is expected to generate 0.61 times more return on investment than Sygnia. However, HomeChoice Investments is 1.63 times less risky than Sygnia. It trades about 0.22 of its potential returns per unit of risk. Sygnia is currently generating about -0.05 per unit of risk. If you would invest  285,000  in HomeChoice Investments on September 27, 2024 and sell it today you would earn a total of  15,000  from holding HomeChoice Investments or generate 5.26% return on investment over 90 days.

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

HomeChoice Investments  vs.  Sygnia

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.

Sygnia

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sygnia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Sygnia is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HomeChoice Investments and Sygnia

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

The idea behind HomeChoice Investments and Sygnia 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.