Correlation Between HOME DEPOT and Brookfield Office

Can any of the company-specific risk be diversified away by investing in both HOME DEPOT and Brookfield Office 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 Brookfield Office into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HOME DEPOT CDR and Brookfield Office Properties, you can compare the effects of market volatilities on HOME DEPOT and Brookfield Office 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 Brookfield Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and Brookfield Office.

Diversification Opportunities for HOME DEPOT and Brookfield Office

0.7

Correlation Coefficient

HOME DEPOT  Brookfield Office

Poor diversification

The 3 months correlation between HOME and Brookfield is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Brookfield Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Office 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 HOME DEPOT CDR are associated (or correlated) with Brookfield Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Office has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Brookfield Office go up and down completely randomly.

Pair Corralation between HOME DEPOT and Brookfield Office

Assuming the 90 days trading horizon HOME DEPOT is expected to generate 5.28 times less return on investment than Brookfield Office. In addition to that, HOME DEPOT is 1.25 times more volatile than Brookfield Office Properties. It trades about 0.01 of its total potential returns per unit of risk. Brookfield Office Properties is currently generating about 0.07 per unit of volatility. If you would invest  1,458  in Brookfield Office Properties on September 20, 2024 and sell it today you would earn a total of  212.00  from holding Brookfield Office Properties or generate 14.54% return on investment over 90 days.

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

HOME DEPOT CDR  vs.  Brookfield Office Properties

HOME DEPOT CDR

Risk-Adjusted Performance

0 of 100

Weak

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

Brookfield Office

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Office Properties are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Brookfield Office may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HOME DEPOT and Brookfield Office

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

The idea behind HOME DEPOT CDR and Brookfield Office Properties 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.