Correlation Between Home Capital and Cox ABG

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

Diversification Opportunities for Home Capital and Cox ABG

0.26

Correlation Coefficient

Home Capital  Cox ABG

Modest diversification

The 3 months correlation between Home and Cox is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Home Capital Rentals and Cox ABG Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cox ABG Group 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 Cox ABG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cox ABG Group has no effect on the direction of Home Capital i.e., Home Capital and Cox ABG go up and down completely randomly.

Pair Corralation between Home Capital and Cox ABG

Assuming the 90 days trading horizon Home Capital Rentals is expected to under-perform the Cox ABG. But the stock apears to be less risky and, when comparing its historical volatility, Home Capital Rentals is 1.19 times less risky than Cox ABG. The stock trades about -0.24 of its potential returns per unit of risk. The Cox ABG Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  960.00  in Cox ABG Group on October 22, 2024 and sell it today you would lose (2.00) from holding Cox ABG Group or give up 0.21% of portfolio value over 90 days.

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

Home Capital Rentals  vs.  Cox ABG Group

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.

Cox ABG Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cox ABG Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Cox ABG 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 Cox ABG

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

The idea behind Home Capital Rentals and Cox ABG Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.