Correlation Between Power Finance and Home First

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

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

Diversification Opportunities for Power Finance and Home First

-0.26

Correlation Coefficient

Power Finance  Home First

Very good diversification

The 3 months correlation between Power and Home is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and Home First Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home First Finance and Power Finance 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 Power Finance are associated (or correlated) with Home First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home First Finance has no effect on the direction of Power Finance i.e., Power Finance and Home First go up and down completely randomly.

Pair Corralation between Power Finance and Home First

Assuming the 90 days trading horizon Power Finance is expected to generate 1.03 times more return on investment than Home First. However, Power Finance is 1.03 times more volatile than Home First Finance. It trades about -0.02 of its potential returns per unit of risk. Home First Finance is currently generating about -0.16 per unit of risk. If you would invest  47,991  in Power Finance on September 25, 2024 and sell it today you would lose (2,341) from holding Power Finance or give up 4.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Power Finance  vs.  Home First Finance

Power Finance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Home First Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home First Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Power Finance and Home First

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

The idea behind Power Finance and Home First Finance 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.