Correlation Between Home Product and Advanced Info

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

By analyzing existing cross correlation between Home Product Center and Advanced Info Service, you can compare the effects of market volatilities on Home Product and Advanced Info 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 Home Product with a short position of Advanced Info. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Product and Advanced Info.

Diversification Opportunities for Home Product and Advanced Info

0.47

Correlation Coefficient

Home Product  Advanced Info

Very weak diversification

The 3 months correlation between Home and Advanced is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Home Product Center and Advanced Info Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Info Service and Home Product 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 Home Product Center are associated (or correlated) with Advanced Info. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Info Service has no effect on the direction of Home Product i.e., Home Product and Advanced Info go up and down completely randomly.

Pair Corralation between Home Product and Advanced Info

Assuming the 90 days trading horizon Home Product Center is expected to under-perform the Advanced Info. In addition to that, Home Product is 1.56 times more volatile than Advanced Info Service. It trades about -0.11 of its total potential returns per unit of risk. Advanced Info Service is currently generating about -0.01 per unit of volatility. If you would invest  28,044  in Advanced Info Service on December 25, 2024 and sell it today you would lose (644.00) from holding Advanced Info Service or give up 2.3% of portfolio value over 90 days.

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

Home Product Center  vs.  Advanced Info Service

Home Product Center

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Product Center has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Advanced Info Service

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Home Product and Advanced Info

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

The idea behind Home Product Center and Advanced Info Service 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.