Correlation Between HOME DEPOT and Ocumetics Technology

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

Diversification Opportunities for HOME DEPOT and Ocumetics Technology

-0.39

Correlation Coefficient

HOME DEPOT  Ocumetics Technology

Very good diversification

The 3 months correlation between HOME and Ocumetics is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Ocumetics Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocumetics Technology 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 Ocumetics Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocumetics Technology Corp has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Ocumetics Technology go up and down completely randomly.

Pair Corralation between HOME DEPOT and Ocumetics Technology

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to under-perform the Ocumetics Technology. But the stock apears to be less risky and, when comparing its historical volatility, HOME DEPOT CDR is 2.3 times less risky than Ocumetics Technology. The stock trades about -0.14 of its potential returns per unit of risk. The Ocumetics Technology Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Ocumetics Technology Corp on September 20, 2024 and sell it today you would earn a total of  1.00  from holding Ocumetics Technology Corp or generate 3.13% return on investment over 90 days.

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

HOME DEPOT CDR  vs.  Ocumetics Technology Corp

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.

Ocumetics Technology Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ocumetics Technology Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Ocumetics Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HOME DEPOT and Ocumetics Technology

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

The idea behind HOME DEPOT CDR and Ocumetics Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.