Correlation Between RS Public and Home Product

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

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

Diversification Opportunities for RS Public and Home Product

0.46

Correlation Coefficient

RS Public  Home Product

Very weak diversification

The 3 months correlation between RS Public and Home is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding RS Public and Home Product Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Product Center and RS Public 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 RS Public are associated (or correlated) with Home Product. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Product Center has no effect on the direction of RS Public i.e., RS Public and Home Product go up and down completely randomly.

Pair Corralation between RS Public and Home Product

Assuming the 90 days horizon RS Public is expected to generate 32.34 times more return on investment than Home Product. However, RS Public is 32.34 times more volatile than Home Product Center. It trades about 0.05 of its potential returns per unit of risk. Home Product Center is currently generating about -0.03 per unit of risk. If you would invest  675.00  in RS Public on October 8, 2024 and sell it today you would lose (135.00) from holding RS Public or give up 20.0% of portfolio value over 90 days.

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

RS Public  vs.  Home Product Center

RS Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Home Product Center

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Product Center has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RS Public and Home Product

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

The idea behind RS Public and Home Product Center 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 Stocks Directory module to find actively traded stocks across global markets.