Correlation Between Bird Construction and HOME DEPOT

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Can any of the company-specific risk be diversified away by investing in both Bird Construction 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 Bird Construction and HOME DEPOT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bird Construction and HOME DEPOT CDR, you can compare the effects of market volatilities on Bird Construction 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 Bird Construction with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bird Construction and HOME DEPOT.

Diversification Opportunities for Bird Construction and HOME DEPOT

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Bird and HOME is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bird Construction and HOME DEPOT CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT CDR and Bird Construction 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 Bird Construction 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 CDR has no effect on the direction of Bird Construction i.e., Bird Construction and HOME DEPOT go up and down completely randomly.

Pair Corralation between Bird Construction and HOME DEPOT

Assuming the 90 days trading horizon Bird Construction is expected to generate 1.53 times more return on investment than HOME DEPOT. However, Bird Construction is 1.53 times more volatile than HOME DEPOT CDR. It trades about -0.2 of its potential returns per unit of risk. HOME DEPOT CDR is currently generating about -0.45 per unit of risk. If you would invest  2,771  in Bird Construction on October 9, 2024 and sell it today you would lose (185.00) from holding Bird Construction or give up 6.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Bird Construction  vs.  HOME DEPOT CDR

 Performance 
       Timeline  
Bird Construction 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Bird Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
HOME DEPOT CDR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HOME DEPOT CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Bird Construction and HOME DEPOT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bird Construction and HOME DEPOT

The main advantage of trading using opposite Bird Construction and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bird Construction 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 Bird Construction and HOME DEPOT CDR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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