Correlation Between Home Depot and Sare Holding

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

Diversification Opportunities for Home Depot and Sare Holding

0.0

Correlation Coefficient

Home Depot  Sare Holding

Pay attention - limited upside

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

Pair Corralation between Home Depot and Sare Holding

If you would invest  802,587  in The Home Depot on October 26, 2024 and sell it today you would earn a total of  37,888  from holding The Home Depot or generate 4.72% 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.  Sare Holding SAB

Home Depot

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Home Depot are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Home Depot is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Sare Holding SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sare Holding SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Sare Holding is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Home Depot and Sare Holding

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

The idea behind The Home Depot and Sare Holding SAB 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.