Correlation Between E Home and WW International

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

By analyzing existing cross correlation between E Home Household Service and WW International, you can compare the effects of market volatilities on E Home and WW International 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 E Home with a short position of WW International. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Home and WW International.

Diversification Opportunities for E Home and WW International

-0.37

Correlation Coefficient

E Home  WW International

Very good diversification

The 3 months correlation between EJH and WW International is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service and WW International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW International and E Home 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 E Home Household Service are associated (or correlated) with WW International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WW International has no effect on the direction of E Home i.e., E Home and WW International go up and down completely randomly.

Pair Corralation between E Home and WW International

Considering the 90-day investment horizon E Home Household Service is expected to under-perform the WW International. In addition to that, E Home is 1.39 times more volatile than WW International. It trades about -0.06 of its total potential returns per unit of risk. WW International is currently generating about 0.01 per unit of volatility. If you would invest  381.00  in WW International on September 4, 2024 and sell it today you would lose (253.00) from holding WW International or give up 66.4% of portfolio value over 90 days.

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

E Home Household Service  vs.  WW International

E Home Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Home Household Service 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 forward-looking indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

WW International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WW International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, WW International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E Home and WW International

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

The idea behind E Home Household Service and WW International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.