Correlation Between HOME DEPOT and Nicola Mining

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

Diversification Opportunities for HOME DEPOT and Nicola Mining

-0.53

Correlation Coefficient

HOME DEPOT  Nicola Mining

Excellent diversification

The 3 months correlation between HOME and Nicola is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Nicola Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicola Mining 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 Nicola Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicola Mining has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Nicola Mining go up and down completely randomly.

Pair Corralation between HOME DEPOT and Nicola Mining

Assuming the 90 days trading horizon HOME DEPOT is expected to generate 4.78 times less return on investment than Nicola Mining. But when comparing it to its historical volatility, HOME DEPOT CDR is 5.09 times less risky than Nicola Mining. It trades about 0.04 of its potential returns per unit of risk. Nicola Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Nicola Mining on September 20, 2024 and sell it today you would earn a total of  6.00  from holding Nicola Mining or generate 27.27% return on investment over 90 days.

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

HOME DEPOT CDR  vs.  Nicola Mining

HOME DEPOT CDR

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, HOME DEPOT is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Nicola Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nicola Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with HOME DEPOT and Nicola Mining

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

The idea behind HOME DEPOT CDR and Nicola Mining 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.