Correlation Between Homeco Daily and Odyssey Energy

Can any of the company-specific risk be diversified away by investing in both Homeco Daily and Odyssey Energy 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 Homeco Daily and Odyssey Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Homeco Daily Needs and Odyssey Energy, you can compare the effects of market volatilities on Homeco Daily and Odyssey Energy 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 Homeco Daily with a short position of Odyssey Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Homeco Daily and Odyssey Energy.

Diversification Opportunities for Homeco Daily and Odyssey Energy

0.64

Correlation Coefficient

Homeco Daily  Odyssey Energy

Poor diversification

The 3 months correlation between Homeco and Odyssey is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Homeco Daily Needs and Odyssey Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odyssey Energy and Homeco Daily 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 Homeco Daily Needs are associated (or correlated) with Odyssey Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odyssey Energy has no effect on the direction of Homeco Daily i.e., Homeco Daily and Odyssey Energy go up and down completely randomly.

Pair Corralation between Homeco Daily and Odyssey Energy

Assuming the 90 days trading horizon Homeco Daily Needs is expected to generate 0.17 times more return on investment than Odyssey Energy. However, Homeco Daily Needs is 5.82 times less risky than Odyssey Energy. It trades about -0.12 of its potential returns per unit of risk. Odyssey Energy is currently generating about -0.08 per unit of risk. If you would invest  124.00  in Homeco Daily Needs on September 24, 2024 and sell it today you would lose (9.00) from holding Homeco Daily Needs or give up 7.26% of portfolio value over 90 days.

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

Homeco Daily Needs  vs.  Odyssey Energy

Homeco Daily Needs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homeco Daily Needs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Odyssey Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Odyssey Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Homeco Daily and Odyssey Energy

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

The idea behind Homeco Daily Needs and Odyssey Energy 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.