Correlation Between HomeToGo and Global Fashion

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

By analyzing existing cross correlation between HomeToGo SE and Global Fashion Group, you can compare the effects of market volatilities on HomeToGo and Global Fashion 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 HomeToGo with a short position of Global Fashion. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeToGo and Global Fashion.

Diversification Opportunities for HomeToGo and Global Fashion

0.58

Correlation Coefficient

HomeToGo  Global Fashion

Very weak diversification

The 3 months correlation between HomeToGo and Global is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding HomeToGo SE and Global Fashion Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Fashion Group and HomeToGo 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 HomeToGo SE are associated (or correlated) with Global Fashion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Fashion Group has no effect on the direction of HomeToGo i.e., HomeToGo and Global Fashion go up and down completely randomly.

Pair Corralation between HomeToGo and Global Fashion

Assuming the 90 days trading horizon HomeToGo SE is expected to under-perform the Global Fashion. But the stock apears to be less risky and, when comparing its historical volatility, HomeToGo SE is 1.35 times less risky than Global Fashion. The stock trades about -0.04 of its potential returns per unit of risk. The Global Fashion Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Global Fashion Group on October 23, 2024 and sell it today you would lose (2.00) from holding Global Fashion Group or give up 8.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

HomeToGo SE  vs.  Global Fashion Group

HomeToGo SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeToGo SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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.

Global Fashion Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Fashion Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Global Fashion is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HomeToGo and Global Fashion

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

The idea behind HomeToGo SE and Global Fashion Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.