Correlation Between Home Center and IM CoLtd

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

By analyzing existing cross correlation between Home Center Holdings and IM CoLtd, you can compare the effects of market volatilities on Home Center and IM CoLtd 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 Center with a short position of IM CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Center and IM CoLtd.

Diversification Opportunities for Home Center and IM CoLtd

0.59

Correlation Coefficient

Home Center  IM CoLtd

Very weak diversification

The 3 months correlation between Home and 101390 is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Home Center Holdings and IM CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IM CoLtd and Home Center 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 Center Holdings are associated (or correlated) with IM CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IM CoLtd has no effect on the direction of Home Center i.e., Home Center and IM CoLtd go up and down completely randomly.

Pair Corralation between Home Center and IM CoLtd

Assuming the 90 days trading horizon Home Center Holdings is expected to under-perform the IM CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, Home Center Holdings is 1.68 times less risky than IM CoLtd. The stock trades about -0.15 of its potential returns per unit of risk. The IM CoLtd is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  305,000  in IM CoLtd on September 12, 2024 and sell it today you would lose (77,500) from holding IM CoLtd or give up 25.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Home Center Holdings  vs.  IM CoLtd

Home Center Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Center Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

IM CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IM CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Home Center and IM CoLtd

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

The idea behind Home Center Holdings and IM CoLtd 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.