Correlation Between Home Capital and Labiana Health

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

Diversification Opportunities for Home Capital and Labiana Health

-0.66

Correlation Coefficient

Home Capital  Labiana Health

Excellent diversification

The 3 months correlation between Home and Labiana is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Home Capital Rentals and Labiana Health SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labiana Health 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 Labiana Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labiana Health SA has no effect on the direction of Home Capital i.e., Home Capital and Labiana Health go up and down completely randomly.

Pair Corralation between Home Capital and Labiana Health

Assuming the 90 days trading horizon Home Capital Rentals is expected to under-perform the Labiana Health. But the stock apears to be less risky and, when comparing its historical volatility, Home Capital Rentals is 2.56 times less risky than Labiana Health. The stock trades about -0.13 of its potential returns per unit of risk. The Labiana Health SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  286.00  in Labiana Health SA on December 27, 2024 and sell it today you would earn a total of  8.00  from holding Labiana Health SA or generate 2.8% return on investment over 90 days.

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

Home Capital Rentals  vs.  Labiana Health SA

Home Capital Rentals

Risk-Adjusted Performance

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.

Labiana Health SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Labiana Health SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Labiana Health 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 Labiana Health

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

The idea behind Home Capital Rentals and Labiana Health 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..