Correlation Between Homebiogas and Israel China

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

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

Diversification Opportunities for Homebiogas and Israel China

-0.7

Correlation Coefficient

Homebiogas  Israel China

Excellent diversification

The 3 months correlation between Homebiogas and Israel is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Homebiogas and Israel China Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel China Biotech 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 Israel China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel China Biotech has no effect on the direction of Homebiogas i.e., Homebiogas and Israel China go up and down completely randomly.

Pair Corralation between Homebiogas and Israel China

Assuming the 90 days trading horizon Homebiogas is expected to under-perform the Israel China. But the stock apears to be less risky and, when comparing its historical volatility, Homebiogas is 1.45 times less risky than Israel China. The stock trades about -0.03 of its potential returns per unit of risk. The Israel China Biotechnology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  80,700  in Israel China Biotechnology on December 1, 2024 and sell it today you would lose (29,700) from holding Israel China Biotechnology or give up 36.8% of portfolio value over 90 days.

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

Homebiogas  vs.  Israel China Biotechnology

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.

Israel China Biotech

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Homebiogas and Israel China

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

The idea behind Homebiogas and Israel China Biotechnology 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.