Correlation Between Homebiogas and Doral Group

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

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

Diversification Opportunities for Homebiogas and Doral Group

0.44

Correlation Coefficient

Homebiogas  Doral Group

Very weak diversification

The 3 months correlation between Homebiogas and Doral is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Homebiogas and Doral Group Renewable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doral Group Renewable and Homebiogas 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 Homebiogas are associated (or correlated) with Doral Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doral Group Renewable has no effect on the direction of Homebiogas i.e., Homebiogas and Doral Group go up and down completely randomly.

Pair Corralation between Homebiogas and Doral Group

Assuming the 90 days trading horizon Homebiogas is expected to generate 4.26 times more return on investment than Doral Group. However, Homebiogas is 4.26 times more volatile than Doral Group Renewable. It trades about 0.16 of its potential returns per unit of risk. Doral Group Renewable is currently generating about 0.11 per unit of risk. If you would invest  6,460  in Homebiogas on December 1, 2024 and sell it today you would earn a total of  6,450  from holding Homebiogas or generate 99.85% return on investment over 90 days.

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

Homebiogas  vs.  Doral Group Renewable

Homebiogas

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Homebiogas are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Homebiogas sustained solid returns over the last few months and may actually be approaching a breakup point.

Doral Group Renewable

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Doral Group Renewable are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doral Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Homebiogas and Doral Group

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

The idea behind Homebiogas and Doral Group Renewable 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.