Correlation Between Home Capital and Airbus Group

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

By analyzing existing cross correlation between Home Capital Rentals and Airbus Group SE, you can compare the effects of market volatilities on Home Capital and Airbus Group 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 Home Capital with a short position of Airbus Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Capital and Airbus Group.

Diversification Opportunities for Home Capital and Airbus Group

-0.63

Correlation Coefficient

Home Capital  Airbus Group

Excellent diversification

The 3 months correlation between Home and Airbus is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Home Capital Rentals and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE and Home Capital 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 Home Capital Rentals are associated (or correlated) with Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of Home Capital i.e., Home Capital and Airbus Group go up and down completely randomly.

Pair Corralation between Home Capital and Airbus Group

If you would invest (100.00) in Airbus Group SE on October 26, 2024 and sell it today you would earn a total of  100.00  from holding Airbus Group SE or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

Home Capital Rentals  vs.  Airbus Group SE

Home Capital Rentals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Capital Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Airbus Group SE

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Airbus Group SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, Airbus Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Capital and Airbus Group

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

The idea behind Home Capital Rentals and Airbus Group SE 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.