Correlation Between Home Product and Com7 PCL

Can any of the company-specific risk be diversified away by investing in both Home Product and Com7 PCL 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 Com7 PCL 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 Com7 PCL, you can compare the effects of market volatilities on Home Product and Com7 PCL 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 Com7 PCL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Product and Com7 PCL.

Diversification Opportunities for Home Product and Com7 PCL

0.93

Correlation Coefficient

Home Product  Com7 PCL

Almost no diversification

The 3 months correlation between Home and Com7 is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Home Product Center and Com7 PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Com7 PCL 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 Com7 PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Com7 PCL has no effect on the direction of Home Product i.e., Home Product and Com7 PCL go up and down completely randomly.

Pair Corralation between Home Product and Com7 PCL

Assuming the 90 days trading horizon Home Product Center is expected to generate 1.52 times more return on investment than Com7 PCL. However, Home Product is 1.52 times more volatile than Com7 PCL. It trades about -0.05 of its potential returns per unit of risk. Com7 PCL is currently generating about -0.19 per unit of risk. If you would invest  940.00  in Home Product Center on December 30, 2024 and sell it today you would lose (105.00) from holding Home Product Center or give up 11.17% of portfolio value over 90 days.

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

Home Product Center  vs.  Com7 PCL

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 latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Com7 PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Com7 PCL 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 forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Home Product and Com7 PCL

The main advantage of trading using opposite Home Product and Com7 PCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Product position performs unexpectedly, Com7 PCL 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 Com7 PCL will offset losses from the drop in Com7 PCL's long position.

The idea behind Home Product Center and Com7 PCL 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.