Correlation Between HomeToGo and GMO Internet

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

By analyzing existing cross correlation between HomeToGo SE and GMO Internet, you can compare the effects of market volatilities on HomeToGo and GMO Internet 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 GMO Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeToGo and GMO Internet.

Diversification Opportunities for HomeToGo and GMO Internet

-0.26

Correlation Coefficient

HomeToGo  GMO Internet

Very good diversification

The 3 months correlation between HomeToGo and GMO is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding HomeToGo SE and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of HomeToGo i.e., HomeToGo and GMO Internet go up and down completely randomly.

Pair Corralation between HomeToGo and GMO Internet

Assuming the 90 days trading horizon HomeToGo SE is expected to generate 3.17 times more return on investment than GMO Internet. However, HomeToGo is 3.17 times more volatile than GMO Internet. It trades about 0.11 of its potential returns per unit of risk. GMO Internet is currently generating about -0.16 per unit of risk. If you would invest  197.00  in HomeToGo SE on October 22, 2024 and sell it today you would earn a total of  10.00  from holding HomeToGo SE or generate 5.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HomeToGo SE  vs.  GMO Internet

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.

GMO Internet

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HomeToGo and GMO Internet

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

The idea behind HomeToGo SE and GMO Internet 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.

Check out your portfolio center.

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.