Correlation Between Home Capital and Commcenter

Can any of the company-specific risk be diversified away by investing in both Home Capital and Commcenter 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 Commcenter 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 Commcenter SA, you can compare the effects of market volatilities on Home Capital and Commcenter 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 Commcenter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Capital and Commcenter.

Diversification Opportunities for Home Capital and Commcenter

0.7

Correlation Coefficient

Home Capital  Commcenter

Poor diversification

The 3 months correlation between Home and Commcenter is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Home Capital Rentals and Commcenter SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commcenter SA 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 Commcenter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commcenter SA has no effect on the direction of Home Capital i.e., Home Capital and Commcenter go up and down completely randomly.

Pair Corralation between Home Capital and Commcenter

If you would invest  202.00  in Commcenter SA on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Commcenter SA or generate 0.0% return on investment over 90 days.

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

Home Capital Rentals  vs.  Commcenter SA

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 unsteady 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.

Commcenter SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commcenter SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Commcenter is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Home Capital and Commcenter

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

The idea behind Home Capital Rentals and Commcenter SA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.