Correlation Between RETAIL FOOD and HomeToGo

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

By analyzing existing cross correlation between RETAIL FOOD GROUP and HomeToGo SE, you can compare the effects of market volatilities on RETAIL FOOD and HomeToGo 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 RETAIL FOOD with a short position of HomeToGo. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and HomeToGo.

Diversification Opportunities for RETAIL FOOD and HomeToGo

0.15

Correlation Coefficient

RETAIL FOOD  HomeToGo

Average diversification

The 3 months correlation between RETAIL and HomeToGo is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE and RETAIL FOOD 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 RETAIL FOOD GROUP are associated (or correlated) with HomeToGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeToGo SE has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and HomeToGo go up and down completely randomly.

Pair Corralation between RETAIL FOOD and HomeToGo

Assuming the 90 days trading horizon RETAIL FOOD is expected to generate 1.14 times less return on investment than HomeToGo. But when comparing it to its historical volatility, RETAIL FOOD GROUP is 1.78 times less risky than HomeToGo. It trades about 0.01 of its potential returns per unit of risk. HomeToGo SE is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  198.00  in HomeToGo SE on September 23, 2024 and sell it today you would lose (4.00) from holding HomeToGo SE or give up 2.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

RETAIL FOOD GROUP  vs.  HomeToGo SE

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, RETAIL FOOD is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

HomeToGo SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeToGo SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, HomeToGo is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RETAIL FOOD and HomeToGo

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

The idea behind RETAIL FOOD GROUP and HomeToGo SE 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.