Correlation Between Home Capital and Catenon SA

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

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

Diversification Opportunities for Home Capital and Catenon SA

0.18

Correlation Coefficient

Home Capital  Catenon SA

Average diversification

The 3 months correlation between Home and Catenon is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Home Capital Rentals and Catenon SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catenon SA and Home Capital 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 Home Capital Rentals are associated (or correlated) with Catenon SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catenon SA has no effect on the direction of Home Capital i.e., Home Capital and Catenon SA go up and down completely randomly.

Pair Corralation between Home Capital and Catenon SA

Assuming the 90 days trading horizon Home Capital Rentals is expected to generate 0.42 times more return on investment than Catenon SA. However, Home Capital Rentals is 2.38 times less risky than Catenon SA. It trades about -0.12 of its potential returns per unit of risk. Catenon SA is currently generating about -0.06 per unit of risk. If you would invest  715.00  in Home Capital Rentals on September 14, 2024 and sell it today you would lose (60.00) from holding Home Capital Rentals or give up 8.39% of portfolio value over 90 days.

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

Home Capital Rentals  vs.  Catenon SA

Home Capital Rentals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Capital Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Catenon SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catenon SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Home Capital and Catenon SA

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

The idea behind Home Capital Rentals and Catenon SA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.