Correlation Between Index International and Home Pottery

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

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

Diversification Opportunities for Index International and Home Pottery

0.44

Correlation Coefficient

Index International  Home Pottery

Very weak diversification

The 3 months correlation between Index and Home is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Index International Group and Home Pottery Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Pottery Public and Index International 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 Index International Group are associated (or correlated) with Home Pottery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Pottery Public has no effect on the direction of Index International i.e., Index International and Home Pottery go up and down completely randomly.

Pair Corralation between Index International and Home Pottery

Assuming the 90 days trading horizon Index International Group is expected to under-perform the Home Pottery. But the stock apears to be less risky and, when comparing its historical volatility, Index International Group is 1.47 times less risky than Home Pottery. The stock trades about -0.36 of its potential returns per unit of risk. The Home Pottery Public is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Home Pottery Public on October 20, 2024 and sell it today you would lose (3.00) from holding Home Pottery Public or give up 6.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Index International Group  vs.  Home Pottery Public

Index International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Index International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Home Pottery Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Pottery Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Index International and Home Pottery

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

The idea behind Index International Group and Home Pottery Public 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.