Correlation Between Haier Smart and MasterBrand

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

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

Diversification Opportunities for Haier Smart and MasterBrand

0.66

Correlation Coefficient

Haier Smart  MasterBrand

Poor diversification

The 3 months correlation between Haier and MasterBrand is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Haier Smart Home and MasterBrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MasterBrand and Haier Smart 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 Haier Smart Home are associated (or correlated) with MasterBrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MasterBrand has no effect on the direction of Haier Smart i.e., Haier Smart and MasterBrand go up and down completely randomly.

Pair Corralation between Haier Smart and MasterBrand

Assuming the 90 days horizon Haier Smart Home is expected to under-perform the MasterBrand. In addition to that, Haier Smart is 1.12 times more volatile than MasterBrand. It trades about 0.0 of its total potential returns per unit of risk. MasterBrand is currently generating about 0.03 per unit of volatility. If you would invest  1,615  in MasterBrand on September 1, 2024 and sell it today you would earn a total of  115.00  from holding MasterBrand or generate 7.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Haier Smart Home  vs.  MasterBrand

Haier Smart Home

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Haier Smart may actually be approaching a critical reversion point that can send shares even higher in December 2024.

MasterBrand

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MasterBrand are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, MasterBrand may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Haier Smart and MasterBrand

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

The idea behind Haier Smart Home and MasterBrand 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.