Correlation Between HOME DEPOT and RT Minerals

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

Diversification Opportunities for HOME DEPOT and RT Minerals

-0.53

Correlation Coefficient

HOME DEPOT  RT Minerals

Excellent diversification

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

Pair Corralation between HOME DEPOT and RT Minerals

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to under-perform the RT Minerals. But the stock apears to be less risky and, when comparing its historical volatility, HOME DEPOT CDR is 6.01 times less risky than RT Minerals. The stock trades about -0.08 of its potential returns per unit of risk. The RT Minerals Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11.00  in RT Minerals Corp on December 27, 2024 and sell it today you would earn a total of  4.00  from holding RT Minerals Corp or generate 36.36% 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.  RT Minerals Corp

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.

RT Minerals Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RT Minerals Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, RT Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HOME DEPOT and RT Minerals

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

The idea behind HOME DEPOT CDR and RT Minerals 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.