Correlation Between Home Depot and McEwen Mining

Can any of the company-specific risk be diversified away by investing in both Home Depot and McEwen Mining 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 McEwen Mining 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 McEwen Mining, you can compare the effects of market volatilities on Home Depot and McEwen Mining 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 McEwen Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and McEwen Mining.

Diversification Opportunities for Home Depot and McEwen Mining

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Correlation Coefficient

Home Depot  McEwen Mining

Pay attention - limited upside

The 3 months correlation between Home and McEwen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and McEwen Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McEwen Mining 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 McEwen Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McEwen Mining has no effect on the direction of Home Depot i.e., Home Depot and McEwen Mining go up and down completely randomly.

Pair Corralation between Home Depot and McEwen Mining

Assuming the 90 days horizon Home Depot is expected to generate 4.18 times less return on investment than McEwen Mining. But when comparing it to its historical volatility, The Home Depot is 5.18 times less risky than McEwen Mining. It trades about 0.09 of its potential returns per unit of risk. McEwen Mining is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,500  in McEwen Mining on October 9, 2024 and sell it today you would earn a total of  12,300  from holding McEwen Mining or generate 164.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Home Depot  vs.  McEwen Mining

Home Depot

Risk-Adjusted Performance

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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.

McEwen Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McEwen Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, McEwen Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Home Depot and McEwen Mining

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

The idea behind The Home Depot and McEwen Mining 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.