Correlation Between Home Depot and Kinnevik Investment

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

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

Diversification Opportunities for Home Depot and Kinnevik Investment

0.07

Correlation Coefficient

Home Depot  Kinnevik Investment

Significant diversification

The 3 months correlation between Home and Kinnevik is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment and Home Depot 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 Depot are associated (or correlated) with Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of Home Depot i.e., Home Depot and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Home Depot and Kinnevik Investment

Assuming the 90 days trading horizon Home Depot is expected to generate 0.08 times more return on investment than Kinnevik Investment. However, Home Depot is 12.76 times less risky than Kinnevik Investment. It trades about 0.13 of its potential returns per unit of risk. Kinnevik Investment AB is currently generating about -0.05 per unit of risk. If you would invest  17,632  in Home Depot on September 21, 2024 and sell it today you would earn a total of  225.00  from holding Home Depot or generate 1.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Home Depot  vs.  Kinnevik Investment AB

Home Depot

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Home Depot is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kinnevik Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinnevik Investment AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Home Depot and Kinnevik Investment

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

The idea behind Home Depot and Kinnevik Investment AB 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.