Correlation Between Cydsa SAB and Home Depot

Can any of the company-specific risk be diversified away by investing in both Cydsa 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 Cydsa 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 Cydsa SAB de and The Home Depot, you can compare the effects of market volatilities on Cydsa 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 Cydsa SAB with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cydsa SAB and Home Depot.

Diversification Opportunities for Cydsa SAB and Home Depot

0.59

Correlation Coefficient

Cydsa SAB  Home Depot

Very weak diversification

The 3 months correlation between Cydsa and Home is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cydsa 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 Cydsa 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 Cydsa 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 Cydsa SAB i.e., Cydsa SAB and Home Depot go up and down completely randomly.

Pair Corralation between Cydsa SAB and Home Depot

Assuming the 90 days trading horizon Cydsa SAB de is expected to generate 1.12 times more return on investment than Home Depot. However, Cydsa SAB is 1.12 times more volatile than The Home Depot. It trades about -0.05 of its potential returns per unit of risk. The Home Depot is currently generating about -0.35 per unit of risk. If you would invest  1,720  in Cydsa SAB de on October 12, 2024 and sell it today you would lose (28.00) from holding Cydsa SAB de or give up 1.63% of portfolio value over 90 days.

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

Cydsa SAB de  vs.  The Home Depot

Cydsa SAB de

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cydsa SAB de are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cydsa SAB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 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 Cydsa SAB and Home Depot

The main advantage of trading using opposite Cydsa SAB and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cydsa 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 Cydsa 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.