Correlation Between HOME DEPOT and Precision Drilling

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

Diversification Opportunities for HOME DEPOT and Precision Drilling

0.73

Correlation Coefficient

HOME DEPOT  Precision Drilling

Poor diversification

The 3 months correlation between HOME and Precision is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling 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 Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Precision Drilling go up and down completely randomly.

Pair Corralation between HOME DEPOT and Precision Drilling

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 0.67 times more return on investment than Precision Drilling. However, HOME DEPOT CDR is 1.5 times less risky than Precision Drilling. It trades about -0.09 of its potential returns per unit of risk. Precision Drilling 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	Significant
Accuracy	100.0%
Values	Daily Returns

HOME DEPOT CDR  vs.  Precision Drilling

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.

Precision Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Precision Drilling 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 Precision Drilling

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

The idea behind HOME DEPOT CDR and Precision Drilling 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..