Correlation Between Home Depot and Grupo Cementos

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

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

Diversification Opportunities for Home Depot and Grupo Cementos

0.02

Correlation Coefficient

Home Depot  Grupo Cementos

Significant diversification

The 3 months correlation between Home and Grupo is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Grupo Cementos de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Cementos de and Home Depot 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 The Home Depot are associated (or correlated) with Grupo Cementos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Cementos de has no effect on the direction of Home Depot i.e., Home Depot and Grupo Cementos go up and down completely randomly.

Pair Corralation between Home Depot and Grupo Cementos

Assuming the 90 days horizon The Home Depot is expected to under-perform the Grupo Cementos. But the stock apears to be less risky and, when comparing its historical volatility, The Home Depot is 1.16 times less risky than Grupo Cementos. The stock trades about -0.08 of its potential returns per unit of risk. The Grupo Cementos de is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18,025  in Grupo Cementos de on December 29, 2024 and sell it today you would earn a total of  1,105  from holding Grupo Cementos de or generate 6.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

The Home Depot  vs.  Grupo Cementos de

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. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Grupo Cementos de

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Cementos de are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Grupo Cementos may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Home Depot and Grupo Cementos

The main advantage of trading using opposite Home Depot and Grupo Cementos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Grupo Cementos 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 Grupo Cementos will offset losses from the drop in Grupo Cementos' long position.

The idea behind The Home Depot and Grupo Cementos de 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.