Correlation Between Home Capital and Plasticos Compuestos

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

Diversification Opportunities for Home Capital and Plasticos Compuestos

-0.2

Correlation Coefficient

Home Capital  Plasticos Compuestos

Good diversification

The 3 months correlation between Home and Plasticos is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Home Capital Rentals and Plasticos Compuestos SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plasticos Compuestos 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 Plasticos Compuestos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plasticos Compuestos has no effect on the direction of Home Capital i.e., Home Capital and Plasticos Compuestos go up and down completely randomly.

Pair Corralation between Home Capital and Plasticos Compuestos

Assuming the 90 days trading horizon Home Capital Rentals is expected to under-perform the Plasticos Compuestos. But the stock apears to be less risky and, when comparing its historical volatility, Home Capital Rentals is 4.43 times less risky than Plasticos Compuestos. The stock trades about -0.04 of its potential returns per unit of risk. The Plasticos Compuestos SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  96.00  in Plasticos Compuestos SA on October 10, 2024 and sell it today you would earn a total of  5.00  from holding Plasticos Compuestos SA or generate 5.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.09%
Values	Daily Returns

Home Capital Rentals  vs.  Plasticos Compuestos 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.

Plasticos Compuestos

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plasticos Compuestos SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Plasticos Compuestos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Capital and Plasticos Compuestos

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

The idea behind Home Capital Rentals and Plasticos Compuestos 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .