Correlation Between Home Capital and Sacyr SA

Can any of the company-specific risk be diversified away by investing in both Home Capital and Sacyr 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 Sacyr 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 Sacyr SA, you can compare the effects of market volatilities on Home Capital and Sacyr 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 Sacyr SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Capital and Sacyr SA.

Diversification Opportunities for Home Capital and Sacyr SA

0.65

Correlation Coefficient

Home Capital  Sacyr SA

Poor diversification

The 3 months correlation between Home and Sacyr is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Home Capital Rentals and Sacyr SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sacyr 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 Sacyr SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sacyr SA has no effect on the direction of Home Capital i.e., Home Capital and Sacyr SA go up and down completely randomly.

Pair Corralation between Home Capital and Sacyr SA

Assuming the 90 days trading horizon Home Capital is expected to generate 18.95 times less return on investment than Sacyr SA. But when comparing it to its historical volatility, Home Capital Rentals is 10.87 times less risky than Sacyr SA. It trades about 0.12 of its potential returns per unit of risk. Sacyr SA is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  307.00  in Sacyr SA on April 22, 2025 and sell it today you would earn a total of  46.00  from holding Sacyr SA or generate 14.98% return on investment over 90 days.

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

Home Capital Rentals  vs.  Sacyr SA

Home Capital Rentals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Capital Rentals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Sacyr SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sacyr SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Sacyr SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Capital and Sacyr SA

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

The idea behind Home Capital Rentals and Sacyr 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.