Correlation Between Masterkool International and Home Pottery

Can any of the company-specific risk be diversified away by investing in both Masterkool 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 Masterkool 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 Masterkool International Public and Home Pottery Public, you can compare the effects of market volatilities on Masterkool 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 Masterkool International with a short position of Home Pottery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masterkool International and Home Pottery.

Diversification Opportunities for Masterkool International and Home Pottery

0.62

Correlation Coefficient

Masterkool International  Home Pottery

Poor diversification

The 3 months correlation between Masterkool and Home is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Masterkool International Publi 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 Masterkool 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 Masterkool International Public 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 Masterkool International i.e., Masterkool International and Home Pottery go up and down completely randomly.

Pair Corralation between Masterkool International and Home Pottery

Assuming the 90 days trading horizon Masterkool International Public is expected to generate 52.75 times more return on investment than Home Pottery. However, Masterkool International is 52.75 times more volatile than Home Pottery Public. It trades about 0.13 of its potential returns per unit of risk. Home Pottery Public is currently generating about 0.0 per unit of risk. If you would invest  0.00  in Masterkool International Public on September 3, 2024 and sell it today you would earn a total of  34.00  from holding Masterkool International Public or generate 9.223372036854776E16% return on investment over 90 days.

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

Masterkool International Publi  vs.  Home Pottery Public

Masterkool International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masterkool International Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Masterkool International disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 quite persistent basic indicators, Home Pottery is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Masterkool International and Home Pottery

The main advantage of trading using opposite Masterkool International and Home Pottery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masterkool 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 Masterkool International Public 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.