Correlation Between Howden Joinery and Hisense Home

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

By analyzing existing cross correlation between Howden Joinery Group and Hisense Home Appliances, you can compare the effects of market volatilities on Howden Joinery and Hisense Home 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 Howden Joinery with a short position of Hisense Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Howden Joinery and Hisense Home.

Diversification Opportunities for Howden Joinery and Hisense Home

0.43

Correlation Coefficient

Howden Joinery  Hisense Home

Very weak diversification

The 3 months correlation between Howden and Hisense is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Howden Joinery Group and Hisense Home Appliances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hisense Home Appliances and Howden Joinery 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 Howden Joinery Group are associated (or correlated) with Hisense Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hisense Home Appliances has no effect on the direction of Howden Joinery i.e., Howden Joinery and Hisense Home go up and down completely randomly.

Pair Corralation between Howden Joinery and Hisense Home

Assuming the 90 days horizon Howden Joinery Group is expected to under-perform the Hisense Home. But the stock apears to be less risky and, when comparing its historical volatility, Howden Joinery Group is 3.04 times less risky than Hisense Home. The stock trades about -0.17 of its potential returns per unit of risk. The Hisense Home Appliances is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  329.00  in Hisense Home Appliances on September 27, 2024 and sell it today you would lose (32.00) from holding Hisense Home Appliances or give up 9.73% of portfolio value over 90 days.

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

Howden Joinery Group  vs.  Hisense Home Appliances

Howden Joinery Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Howden Joinery Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hisense Home Appliances

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hisense Home Appliances has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hisense Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Howden Joinery and Hisense Home

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

The idea behind Howden Joinery Group and Hisense Home Appliances 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.