Correlation Between Matrix and Holmes Place

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

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

Diversification Opportunities for Matrix and Holmes Place

0.8

Correlation Coefficient

Matrix  Holmes Place

Very poor diversification

The 3 months correlation between Matrix and Holmes is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Matrix and Holmes Place International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holmes Place Interna and Matrix 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 Matrix are associated (or correlated) with Holmes Place. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holmes Place Interna has no effect on the direction of Matrix i.e., Matrix and Holmes Place go up and down completely randomly.

Pair Corralation between Matrix and Holmes Place

Assuming the 90 days trading horizon Matrix is expected to generate 1.55 times less return on investment than Holmes Place. But when comparing it to its historical volatility, Matrix is 1.33 times less risky than Holmes Place. It trades about 0.18 of its potential returns per unit of risk. Holmes Place International is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  52,781  in Holmes Place International on November 19, 2024 and sell it today you would earn a total of  11,199  from holding Holmes Place International or generate 21.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.08%
Values	Daily Returns

Matrix  vs.  Holmes Place International

Matrix

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Matrix sustained solid returns over the last few months and may actually be approaching a breakup point.

Holmes Place Interna

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Holmes Place International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Holmes Place sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matrix and Holmes Place

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

The idea behind Matrix and Holmes Place International 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.