Correlation Between Cairo Communication and Home Depot

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

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

Diversification Opportunities for Cairo Communication and Home Depot

0.46

Correlation Coefficient

Cairo Communication  Home Depot

Very weak diversification

The 3 months correlation between Cairo and Home is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Communication SpA and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Cairo Communication 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 Cairo Communication SpA 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 Cairo Communication i.e., Cairo Communication and Home Depot go up and down completely randomly.

Pair Corralation between Cairo Communication and Home Depot

Assuming the 90 days trading horizon Cairo Communication SpA is expected to generate 2.25 times more return on investment than Home Depot. However, Cairo Communication is 2.25 times more volatile than The Home Depot. It trades about 0.0 of its potential returns per unit of risk. The Home Depot is currently generating about -0.33 per unit of risk. If you would invest  240.00  in Cairo Communication SpA on October 11, 2024 and sell it today you would lose (2.00) from holding Cairo Communication SpA or give up 0.83% of portfolio value over 90 days.

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

Cairo Communication SpA  vs.  The Home Depot

Cairo Communication SpA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Cairo Communication unveiled solid returns over the last few months and may actually be approaching a breakup point.

Home Depot

Risk-Adjusted Performance

0 of 100

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

Pair Trading with Cairo Communication and Home Depot

The main advantage of trading using opposite Cairo Communication and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairo Communication 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 Cairo Communication SpA 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.