Correlation Between Fras Le and Home Depot

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

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

Diversification Opportunities for Fras Le and Home Depot

-0.92

Correlation Coefficient

Fras Le  Home Depot

Pay attention - limited upside

The 3 months correlation between Fras and Home is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Fras Le 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 Fras le SA 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 Fras Le i.e., Fras Le and Home Depot go up and down completely randomly.

Pair Corralation between Fras Le and Home Depot

Assuming the 90 days trading horizon Fras le SA is expected to generate 0.5 times more return on investment than Home Depot. However, Fras le SA is 2.01 times less risky than Home Depot. It trades about 0.41 of its potential returns per unit of risk. The Home Depot is currently generating about -0.1 per unit of risk. If you would invest  2,050  in Fras le SA on December 30, 2024 and sell it today you would earn a total of  697.00  from holding Fras le SA or generate 34.0% return on investment over 90 days.

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

Fras le SA  vs.  The Home Depot

Fras le SA

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fras le SA are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fras Le unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fras Le and Home Depot

The main advantage of trading using opposite Fras Le and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le 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 Fras le SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.