Correlation Between Home Depot and AfriTin Mining

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

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

Diversification Opportunities for Home Depot and AfriTin Mining

0.88

Correlation Coefficient

Home Depot  AfriTin Mining

Very poor diversification

The 3 months correlation between Home and AfriTin is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and AfriTin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfriTin Mining 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 AfriTin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfriTin Mining has no effect on the direction of Home Depot i.e., Home Depot and AfriTin Mining go up and down completely randomly.

Pair Corralation between Home Depot and AfriTin Mining

Assuming the 90 days trading horizon Home Depot is expected to generate 49.26 times less return on investment than AfriTin Mining. But when comparing it to its historical volatility, Home Depot is 44.8 times less risky than AfriTin Mining. It trades about 0.12 of its potential returns per unit of risk. AfriTin Mining is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  212.00  in AfriTin Mining on December 30, 2024 and sell it today you would earn a total of  136.00  from holding AfriTin Mining or generate 64.15% return on investment over 90 days.

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

Home Depot  vs.  AfriTin Mining

Home Depot

Risk-Adjusted Performance

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. In spite of comparatively stable basic indicators, Home Depot is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

AfriTin Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AfriTin Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, AfriTin Mining exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Depot and AfriTin Mining

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

The idea behind Home Depot and AfriTin Mining 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.