Correlation Between HOME DEPOT and Lion One

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

Diversification Opportunities for HOME DEPOT and Lion One

0.24

Correlation Coefficient

HOME DEPOT  Lion One

Modest diversification

The 3 months correlation between HOME and Lion is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Lion One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion One Metals 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 Lion One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion One Metals has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Lion One go up and down completely randomly.

Pair Corralation between HOME DEPOT and Lion One

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to under-perform the Lion One. But the stock apears to be less risky and, when comparing its historical volatility, HOME DEPOT CDR is 4.65 times less risky than Lion One. The stock trades about -0.12 of its potential returns per unit of risk. The Lion One Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Lion One Metals on December 20, 2024 and sell it today you would earn a total of  5.00  from holding Lion One Metals or generate 18.52% return on investment over 90 days.

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

HOME DEPOT CDR  vs.  Lion One Metals

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.

Lion One Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lion One Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lion One showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HOME DEPOT and Lion One

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

The idea behind HOME DEPOT CDR and Lion One Metals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.