Correlation Between Hooker Furniture and NetSol Technologies

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

By analyzing existing cross correlation between Hooker Furniture and NetSol Technologies, you can compare the effects of market volatilities on Hooker Furniture and NetSol Technologies 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 NetSol Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hooker Furniture and NetSol Technologies.

Diversification Opportunities for Hooker Furniture and NetSol Technologies

-0.35

Correlation Coefficient

Hooker Furniture  NetSol Technologies

Very good diversification

The 3 months correlation between Hooker and NetSol is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hooker Furniture and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of Hooker Furniture i.e., Hooker Furniture and NetSol Technologies go up and down completely randomly.

Pair Corralation between Hooker Furniture and NetSol Technologies

Given the investment horizon of 90 days Hooker Furniture is expected to under-perform the NetSol Technologies. In addition to that, Hooker Furniture is 1.46 times more volatile than NetSol Technologies. It trades about -0.06 of its total potential returns per unit of risk. NetSol Technologies is currently generating about -0.03 per unit of volatility. If you would invest  281.00  in NetSol Technologies on September 24, 2024 and sell it today you would lose (15.00) from holding NetSol Technologies or give up 5.34% 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.  NetSol Technologies

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

NetSol Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetSol Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, NetSol Technologies is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Hooker Furniture and NetSol Technologies

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

The idea behind Hooker Furniture and NetSol Technologies 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.