Correlation Between Capstone Mining and HOME DEPOT

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

By analyzing existing cross correlation between Capstone Mining Corp and HOME DEPOT CDR, you can compare the effects of market volatilities on Capstone Mining 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 Capstone Mining with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capstone Mining and HOME DEPOT.

Diversification Opportunities for Capstone Mining and HOME DEPOT

0.68

Correlation Coefficient

Capstone Mining  HOME DEPOT

Poor diversification

The 3 months correlation between Capstone and HOME is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Mining Corp 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 Capstone Mining 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 Capstone Mining Corp 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 Capstone Mining i.e., Capstone Mining and HOME DEPOT go up and down completely randomly.

Pair Corralation between Capstone Mining and HOME DEPOT

Assuming the 90 days horizon Capstone Mining is expected to generate 1.51 times less return on investment than HOME DEPOT. In addition to that, Capstone Mining is 2.31 times more volatile than HOME DEPOT CDR. It trades about 0.07 of its total potential returns per unit of risk. HOME DEPOT CDR is currently generating about 0.24 per unit of volatility. If you would invest  2,349  in HOME DEPOT CDR on August 31, 2024 and sell it today you would earn a total of  436.00  from holding HOME DEPOT CDR or generate 18.56% return on investment over 90 days.

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

Capstone Mining Corp  vs.  HOME DEPOT CDR

Capstone Mining Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Mining Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Capstone Mining may actually be approaching a critical reversion point that can send shares even higher in December 2024.

HOME DEPOT CDR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HOME DEPOT CDR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, HOME DEPOT displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capstone Mining and HOME DEPOT

The main advantage of trading using opposite Capstone Mining and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capstone Mining 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 Capstone Mining Corp 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.

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