Correlation Between Leons Furniture and Quipt Home

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

By analyzing existing cross correlation between Leons Furniture Limited and Quipt Home Medical, you can compare the effects of market volatilities on Leons Furniture and Quipt Home 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 Leons Furniture with a short position of Quipt Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Quipt Home.

Diversification Opportunities for Leons Furniture and Quipt Home

0.22

Correlation Coefficient

Leons Furniture  Quipt Home

Modest diversification

The 3 months correlation between Leons and Quipt is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Quipt Home Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quipt Home Medical and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with Quipt Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quipt Home Medical has no effect on the direction of Leons Furniture i.e., Leons Furniture and Quipt Home go up and down completely randomly.

Pair Corralation between Leons Furniture and Quipt Home

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Quipt Home. But the stock apears to be less risky and, when comparing its historical volatility, Leons Furniture Limited is 4.13 times less risky than Quipt Home. The stock trades about -0.05 of its potential returns per unit of risk. The Quipt Home Medical is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  328.00  in Quipt Home Medical on September 22, 2024 and sell it today you would earn a total of  29.00  from holding Quipt Home Medical or generate 8.84% return on investment over 90 days.

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

Leons Furniture Limited  vs.  Quipt Home Medical

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Quipt Home Medical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quipt Home Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Quipt Home is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Leons Furniture and Quipt Home

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

The idea behind Leons Furniture Limited and Quipt Home Medical 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.