Correlation Between WW International and E Home

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

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

Diversification Opportunities for WW International and E Home

0.29

Correlation Coefficient

WW International  E Home

Modest diversification

The 3 months correlation between WW International and EJH is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding WW International and E Home Household Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Home Household and WW 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 WW International are associated (or correlated) with E Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Home Household has no effect on the direction of WW International i.e., WW International and E Home go up and down completely randomly.

Pair Corralation between WW International and E Home

Allowing for the 90-day total investment horizon WW International is expected to under-perform the E Home. But the stock apears to be less risky and, when comparing its historical volatility, WW International is 1.54 times less risky than E Home. The stock trades about -0.12 of its potential returns per unit of risk. The E Home Household Service is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  78.00  in E Home Household Service on November 28, 2024 and sell it today you would lose (20.00) from holding E Home Household Service or give up 25.64% of portfolio value over 90 days.

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

WW International  vs.  E Home Household Service

WW International

Risk-Adjusted Performance

Very Weak

Over the last 90 days WW International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

E Home Household

Risk-Adjusted Performance

Very Weak

Over the last 90 days E Home Household Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking indicators, E Home is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with WW International and E Home

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

The idea behind WW International and E Home Household Service 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.