Correlation Between Home First and Industrial Investment

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

By analyzing existing cross correlation between Home First Finance and Industrial Investment Trust, you can compare the effects of market volatilities on Home First and Industrial 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 Home First with a short position of Industrial Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home First and Industrial Investment.

Diversification Opportunities for Home First and Industrial Investment

0.22

Correlation Coefficient

Home First  Industrial Investment

Modest diversification

The 3 months correlation between Home and Industrial is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Home First Finance and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment and Home First 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 First Finance are associated (or correlated) with Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of Home First i.e., Home First and Industrial Investment go up and down completely randomly.

Pair Corralation between Home First and Industrial Investment

Assuming the 90 days trading horizon Home First Finance is expected to generate 0.78 times more return on investment than Industrial Investment. However, Home First Finance is 1.28 times less risky than Industrial Investment. It trades about -0.09 of its potential returns per unit of risk. Industrial Investment Trust is currently generating about -0.16 per unit of risk. If you would invest  105,215  in Home First Finance on November 29, 2024 and sell it today you would lose (12,725) from holding Home First Finance or give up 12.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Home First Finance  vs.  Industrial Investment Trust

Home First Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home First Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Industrial Investment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Home First and Industrial Investment

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

The idea behind Home First Finance and Industrial Investment Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.