Correlation Between ALPEK SAB and Home Depot

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

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

Diversification Opportunities for ALPEK SAB and Home Depot

0.36

Correlation Coefficient

ALPEK SAB  Home Depot

Weak diversification

The 3 months correlation between ALPEK and Home is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding ALPEK SAB de and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and ALPEK SAB 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 ALPEK SAB de are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of ALPEK SAB i.e., ALPEK SAB and Home Depot go up and down completely randomly.

Pair Corralation between ALPEK SAB and Home Depot

Assuming the 90 days trading horizon ALPEK SAB is expected to generate 35.0 times less return on investment than Home Depot. In addition to that, ALPEK SAB is 1.79 times more volatile than The Home Depot. It trades about 0.0 of its total potential returns per unit of risk. The Home Depot is currently generating about 0.08 per unit of volatility. If you would invest  553,157  in The Home Depot on December 2, 2024 and sell it today you would earn a total of  259,839  from holding The Home Depot or generate 46.97% return on investment over 90 days.

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

ALPEK SAB de  vs.  The Home Depot

ALPEK SAB de

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALPEK SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALPEK SAB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Home Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Home Depot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ALPEK SAB and Home Depot

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

The idea behind ALPEK SAB de and The Home Depot 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.