Correlation Between Home First and Spencers Retail

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

Diversification Opportunities for Home First and Spencers Retail

0.78

Correlation Coefficient

Home First  Spencers Retail

Poor diversification

The 3 months correlation between Home and Spencers is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Home First Finance and Spencers Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spencers Retail 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 Spencers Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spencers Retail has no effect on the direction of Home First i.e., Home First and Spencers Retail go up and down completely randomly.

Pair Corralation between Home First and Spencers Retail

Assuming the 90 days trading horizon Home First Finance is expected to generate 0.72 times more return on investment than Spencers Retail. However, Home First Finance is 1.39 times less risky than Spencers Retail. It trades about 0.04 of its potential returns per unit of risk. Spencers Retail Limited is currently generating about 0.03 per unit of risk. If you would invest  73,187  in Home First Finance on October 11, 2024 and sell it today you would earn a total of  32,283  from holding Home First Finance or generate 44.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Home First Finance  vs.  Spencers Retail Limited

Home First Finance

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Home First and Spencers Retail

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

The idea behind Home First Finance and Spencers Retail 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.