Correlation Between HOME DEPOT and Capstone Mining

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

Diversification Opportunities for HOME DEPOT and Capstone Mining

0.68

Correlation Coefficient

HOME DEPOT  Capstone Mining

Poor diversification

The 3 months correlation between HOME and Capstone is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Capstone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Mining Corp 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 Capstone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Mining Corp has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Capstone Mining go up and down completely randomly.

Pair Corralation between HOME DEPOT and Capstone Mining

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 0.43 times more return on investment than Capstone Mining. However, HOME DEPOT CDR is 2.31 times less risky than Capstone Mining. It trades about 0.24 of its potential returns per unit of risk. Capstone Mining Corp is currently generating about 0.07 per unit of risk. If you would invest  2,349  in HOME DEPOT CDR on August 31, 2024 and sell it today you would earn a total of  436.00  from holding HOME DEPOT CDR or generate 18.56% 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.  Capstone Mining Corp

HOME DEPOT CDR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HOME DEPOT CDR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, HOME DEPOT displayed solid returns over the last few months and may actually be approaching a breakup point.

Capstone Mining Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Mining Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Capstone Mining may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with HOME DEPOT and Capstone Mining

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

The idea behind HOME DEPOT CDR and Capstone Mining Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.