Correlation Between Sri Trang and Home Product

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

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

Diversification Opportunities for Sri Trang and Home Product

0.9

Correlation Coefficient

Sri Trang  Home Product

Almost no diversification

The 3 months correlation between Sri and Home is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sri Trang Gloves 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 Sri Trang 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 Sri Trang Gloves 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 Sri Trang i.e., Sri Trang and Home Product go up and down completely randomly.

Pair Corralation between Sri Trang and Home Product

Assuming the 90 days trading horizon Sri Trang Gloves is expected to under-perform the Home Product. But the stock apears to be less risky and, when comparing its historical volatility, Sri Trang Gloves is 1.19 times less risky than Home Product. The stock trades about -0.18 of its potential returns per unit of risk. The Home Product Center is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  945.00  in Home Product Center on December 21, 2024 and sell it today you would lose (155.00) from holding Home Product Center or give up 16.4% of portfolio value over 90 days.

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

Sri Trang Gloves  vs.  Home Product Center

Sri Trang Gloves

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sri Trang Gloves 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 forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Home Product Center

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sri Trang and Home Product

The main advantage of trading using opposite Sri Trang and Home Product positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sri Trang 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 Sri Trang Gloves 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.