Correlation Between Hooker Furniture and CapitaLand Investment

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

By analyzing existing cross correlation between Hooker Furniture and CapitaLand Investment Limited, you can compare the effects of market volatilities on Hooker Furniture and CapitaLand Investment 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 Hooker Furniture with a short position of CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hooker Furniture and CapitaLand Investment.

Diversification Opportunities for Hooker Furniture and CapitaLand Investment

-0.36

Correlation Coefficient

Hooker Furniture  CapitaLand Investment

Very good diversification

The 3 months correlation between Hooker and CapitaLand is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hooker Furniture and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment and Hooker Furniture 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 Hooker Furniture are associated (or correlated) with CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of Hooker Furniture i.e., Hooker Furniture and CapitaLand Investment go up and down completely randomly.

Pair Corralation between Hooker Furniture and CapitaLand Investment

Given the investment horizon of 90 days Hooker Furniture is expected to under-perform the CapitaLand Investment. But the stock apears to be less risky and, when comparing its historical volatility, Hooker Furniture is 1.76 times less risky than CapitaLand Investment. The stock trades about -0.01 of its potential returns per unit of risk. The CapitaLand Investment Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  227.00  in CapitaLand Investment Limited on October 12, 2024 and sell it today you would lose (28.00) from holding CapitaLand Investment Limited or give up 12.33% of portfolio value over 90 days.

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

Hooker Furniture  vs.  CapitaLand Investment Limited

Hooker Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hooker Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CapitaLand Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Hooker Furniture and CapitaLand Investment

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

The idea behind Hooker Furniture and CapitaLand Investment Limited 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.