Correlation Between Holmes Place and Willy Food

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

By analyzing existing cross correlation between Holmes Place International and Willy Food, you can compare the effects of market volatilities on Holmes Place and Willy Food 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 Holmes Place with a short position of Willy Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holmes Place and Willy Food.

Diversification Opportunities for Holmes Place and Willy Food

0.35

Correlation Coefficient

Holmes Place  Willy Food

Weak diversification

The 3 months correlation between Holmes and Willy is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Holmes Place International and Willy Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willy Food and Holmes Place 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 Holmes Place International are associated (or correlated) with Willy Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willy Food has no effect on the direction of Holmes Place i.e., Holmes Place and Willy Food go up and down completely randomly.

Pair Corralation between Holmes Place and Willy Food

Assuming the 90 days trading horizon Holmes Place International is expected to generate 1.06 times more return on investment than Willy Food. However, Holmes Place is 1.06 times more volatile than Willy Food. It trades about 0.22 of its potential returns per unit of risk. Willy Food is currently generating about 0.0 per unit of risk. If you would invest  53,190  in Holmes Place International on December 30, 2024 and sell it today you would earn a total of  11,430  from holding Holmes Place International or generate 21.49% return on investment over 90 days.

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

Holmes Place International  vs.  Willy Food

Holmes Place Interna

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Holmes Place International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Holmes Place sustained solid returns over the last few months and may actually be approaching a breakup point.

Willy Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willy Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Willy Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Holmes Place and Willy Food

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

The idea behind Holmes Place International and Willy Food 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.