Correlation Between THORNEY TECHS and Focus Home

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

By analyzing existing cross correlation between THORNEY TECHS LTD and Focus Home Interactive, you can compare the effects of market volatilities on THORNEY TECHS and Focus Home 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 THORNEY TECHS with a short position of Focus Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of THORNEY TECHS and Focus Home.

Diversification Opportunities for THORNEY TECHS and Focus Home

0.61

Correlation Coefficient

THORNEY TECHS  Focus Home

Poor diversification

The 3 months correlation between THORNEY and Focus is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding THORNEY TECHS LTD and Focus Home Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Home Interactive and THORNEY TECHS 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 THORNEY TECHS LTD are associated (or correlated) with Focus Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Home Interactive has no effect on the direction of THORNEY TECHS i.e., THORNEY TECHS and Focus Home go up and down completely randomly.

Pair Corralation between THORNEY TECHS and Focus Home

Assuming the 90 days horizon THORNEY TECHS LTD is expected to under-perform the Focus Home. In addition to that, THORNEY TECHS is 1.26 times more volatile than Focus Home Interactive. It trades about -0.04 of its total potential returns per unit of risk. Focus Home Interactive is currently generating about -0.03 per unit of volatility. If you would invest  1,880  in Focus Home Interactive on December 21, 2024 and sell it today you would lose (122.00) from holding Focus Home Interactive or give up 6.49% of portfolio value over 90 days.

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

THORNEY TECHS LTD  vs.  Focus Home Interactive

THORNEY TECHS LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days THORNEY TECHS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Focus Home Interactive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Focus Home Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Focus Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with THORNEY TECHS and Focus Home

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

The idea behind THORNEY TECHS LTD and Focus Home Interactive 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.