Correlation Between HOME DEPOT and Primaris Retail

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

Diversification Opportunities for HOME DEPOT and Primaris Retail

-0.35

Correlation Coefficient

HOME DEPOT  Primaris Retail

Very good diversification

The 3 months correlation between HOME and Primaris is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Primaris Retail RE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primaris Retail RE 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 Primaris Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primaris Retail RE has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Primaris Retail go up and down completely randomly.

Pair Corralation between HOME DEPOT and Primaris Retail

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to under-perform the Primaris Retail. In addition to that, HOME DEPOT is 1.18 times more volatile than Primaris Retail RE. It trades about -0.09 of its total potential returns per unit of risk. Primaris Retail RE is currently generating about -0.04 per unit of volatility. If you would invest  1,542  in Primaris Retail RE on December 30, 2024 and sell it today you would lose (51.00) from holding Primaris Retail RE or give up 3.31% of portfolio value over 90 days.

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

HOME DEPOT CDR  vs.  Primaris Retail RE

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 abnormal 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.

Primaris Retail RE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Primaris Retail RE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Primaris Retail is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HOME DEPOT and Primaris Retail

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

The idea behind HOME DEPOT CDR and Primaris Retail RE 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.