Correlation Between Home Depot and PCI PAL

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

By analyzing existing cross correlation between Home Depot and PCI PAL PLC, you can compare the effects of market volatilities on Home Depot and PCI PAL 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 PCI PAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and PCI PAL.

Diversification Opportunities for Home Depot and PCI PAL

-0.5

Correlation Coefficient

Home Depot  PCI PAL

Very good diversification

The 3 months correlation between Home and PCI is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and PCI PAL PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCI PAL PLC 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 PCI PAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCI PAL PLC has no effect on the direction of Home Depot i.e., Home Depot and PCI PAL go up and down completely randomly.

Pair Corralation between Home Depot and PCI PAL

Assuming the 90 days trading horizon Home Depot is expected to generate 0.11 times more return on investment than PCI PAL. However, Home Depot is 9.45 times less risky than PCI PAL. It trades about 0.13 of its potential returns per unit of risk. PCI PAL PLC is currently generating about -0.21 per unit of risk. If you would invest  17,627  in Home Depot on December 21, 2024 and sell it today you would earn a total of  230.00  from holding Home Depot or generate 1.3% return on investment over 90 days.

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

Home Depot  vs.  PCI PAL PLC

Home Depot

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 10 (%) 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 newest stock price mess, may contribute to short-term losses for the institutional investors.

PCI PAL PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days PCI PAL PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Home Depot and PCI PAL

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

The idea behind Home Depot and PCI PAL PLC 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.