Correlation Between Alton Sports and Cuckoo Homesys

Can any of the company-specific risk be diversified away by investing in both Alton Sports and Cuckoo Homesys 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 Alton Sports and Cuckoo Homesys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alton Sports CoLtd and Cuckoo Homesys Co, you can compare the effects of market volatilities on Alton Sports and Cuckoo Homesys 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 Alton Sports with a short position of Cuckoo Homesys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alton Sports and Cuckoo Homesys.

Diversification Opportunities for Alton Sports and Cuckoo Homesys

0.92

Correlation Coefficient

Alton Sports  Cuckoo Homesys

Almost no diversification

The 3 months correlation between Alton and Cuckoo is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Alton Sports CoLtd and Cuckoo Homesys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cuckoo Homesys and Alton Sports 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 Alton Sports CoLtd are associated (or correlated) with Cuckoo Homesys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cuckoo Homesys has no effect on the direction of Alton Sports i.e., Alton Sports and Cuckoo Homesys go up and down completely randomly.

Pair Corralation between Alton Sports and Cuckoo Homesys

Assuming the 90 days trading horizon Alton Sports CoLtd is expected to under-perform the Cuckoo Homesys. But the stock apears to be less risky and, when comparing its historical volatility, Alton Sports CoLtd is 1.07 times less risky than Cuckoo Homesys. The stock trades about -0.14 of its potential returns per unit of risk. The Cuckoo Homesys Co is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,180,000  in Cuckoo Homesys Co on September 22, 2024 and sell it today you would lose (140,000) from holding Cuckoo Homesys Co or give up 6.42% of portfolio value over 90 days.

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

Alton Sports CoLtd  vs.  Cuckoo Homesys Co

Alton Sports CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alton Sports 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.

Cuckoo Homesys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cuckoo Homesys Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cuckoo Homesys is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alton Sports and Cuckoo Homesys

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

The idea behind Alton Sports CoLtd and Cuckoo Homesys Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.