Correlation Between HOME DEPOT and Cineplex

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

Diversification Opportunities for HOME DEPOT and Cineplex

0.59

Correlation Coefficient

HOME DEPOT  Cineplex

Very weak diversification

The 3 months correlation between HOME and Cineplex is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Cineplex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cineplex 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 Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cineplex has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Cineplex go up and down completely randomly.

Pair Corralation between HOME DEPOT and Cineplex

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 0.83 times more return on investment than Cineplex. However, HOME DEPOT CDR is 1.2 times less risky than Cineplex. It trades about -0.09 of its potential returns per unit of risk. Cineplex is currently generating about -0.19 per unit of risk. If you would invest  2,495  in HOME DEPOT CDR on December 30, 2024 and sell it today you would lose (203.00) from holding HOME DEPOT CDR or give up 8.14% of portfolio value over 90 days.

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

HOME DEPOT CDR  vs.  Cineplex

HOME DEPOT CDR

Risk-Adjusted Performance

Very 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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Cineplex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cineplex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with HOME DEPOT and Cineplex

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

The idea behind HOME DEPOT CDR and Cineplex 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.