Correlation Between HomeToGo and Sporttotal

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

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

Diversification Opportunities for HomeToGo and Sporttotal

0.53

Correlation Coefficient

HomeToGo  Sporttotal

Very weak diversification

The 3 months correlation between HomeToGo and Sporttotal is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding HomeToGo SE and Sporttotal AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporttotal AG 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 Sporttotal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporttotal AG has no effect on the direction of HomeToGo i.e., HomeToGo and Sporttotal go up and down completely randomly.

Pair Corralation between HomeToGo and Sporttotal

Assuming the 90 days trading horizon HomeToGo is expected to generate 1.48 times less return on investment than Sporttotal. But when comparing it to its historical volatility, HomeToGo SE is 5.21 times less risky than Sporttotal. It trades about 0.18 of its potential returns per unit of risk. Sporttotal AG is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Sporttotal AG on October 20, 2024 and sell it today you would lose (2.00) from holding Sporttotal AG or give up 7.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

HomeToGo SE  vs.  Sporttotal AG

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 comparatively stable technical and fundamental indicators, HomeToGo is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sporttotal AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sporttotal AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Sporttotal 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 Sporttotal

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

The idea behind HomeToGo SE and Sporttotal AG 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.