Correlation Between Homeritz Bhd and CPE Technology

Can any of the company-specific risk be diversified away by investing in both Homeritz Bhd and CPE Technology 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 Homeritz Bhd and CPE Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Homeritz Bhd and CPE Technology Berhad, you can compare the effects of market volatilities on Homeritz Bhd and CPE Technology 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 Homeritz Bhd with a short position of CPE Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Homeritz Bhd and CPE Technology.

Diversification Opportunities for Homeritz Bhd and CPE Technology

0.3

Correlation Coefficient

Homeritz Bhd  CPE Technology

Weak diversification

The 3 months correlation between Homeritz and CPE is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Homeritz Bhd and CPE Technology Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPE Technology Berhad and Homeritz Bhd 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 Homeritz Bhd are associated (or correlated) with CPE Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPE Technology Berhad has no effect on the direction of Homeritz Bhd i.e., Homeritz Bhd and CPE Technology go up and down completely randomly.

Pair Corralation between Homeritz Bhd and CPE Technology

Assuming the 90 days trading horizon Homeritz Bhd is expected to generate 1.09 times more return on investment than CPE Technology. However, Homeritz Bhd is 1.09 times more volatile than CPE Technology Berhad. It trades about 0.26 of its potential returns per unit of risk. CPE Technology Berhad is currently generating about 0.15 per unit of risk. If you would invest  54.00  in Homeritz Bhd on September 27, 2024 and sell it today you would earn a total of  5.00  from holding Homeritz Bhd or generate 9.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Homeritz Bhd  vs.  CPE Technology Berhad

Homeritz Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Homeritz Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Homeritz Bhd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CPE Technology Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPE Technology Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, CPE Technology is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Homeritz Bhd and CPE Technology

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

The idea behind Homeritz Bhd and CPE Technology Berhad 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.