Correlation Between Home Depot and Alpha Bank

Can any of the company-specific risk be diversified away by investing in both Home Depot and Alpha Bank 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 Alpha Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Depot and Alpha Bank SA, you can compare the effects of market volatilities on Home Depot and Alpha Bank 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 Alpha Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Alpha Bank.

Diversification Opportunities for Home Depot and Alpha Bank

-0.26

Correlation Coefficient

Home Depot  Alpha Bank

Very good diversification

The 3 months correlation between Home and Alpha is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Alpha Bank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Bank SA 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 are associated (or correlated) with Alpha Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Bank SA has no effect on the direction of Home Depot i.e., Home Depot and Alpha Bank go up and down completely randomly.

Pair Corralation between Home Depot and Alpha Bank

Allowing for the 90-day total investment horizon Home Depot is expected to generate 7.36 times less return on investment than Alpha Bank. But when comparing it to its historical volatility, Home Depot is 1.67 times less risky than Alpha Bank. It trades about 0.04 of its potential returns per unit of risk. Alpha Bank SA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Alpha Bank SA on December 2, 2024 and sell it today you would earn a total of  7.00  from holding Alpha Bank SA or generate 18.42% return on investment over 90 days.

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

Home Depot  vs.  Alpha Bank SA

Home Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Alpha Bank SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Bank SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking signals, Alpha Bank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Depot and Alpha Bank

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

The idea behind Home Depot and Alpha Bank SA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.