Correlation Between Home Depot and Api Growth

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

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

Diversification Opportunities for Home Depot and Api Growth

0.84

Correlation Coefficient

Home Depot  Api Growth

Very poor diversification

The 3 months correlation between Home and Api is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Api Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Api Growth Fund 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 Api Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Api Growth Fund has no effect on the direction of Home Depot i.e., Home Depot and Api Growth go up and down completely randomly.

Pair Corralation between Home Depot and Api Growth

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.24 times more return on investment than Api Growth. However, Home Depot is 1.24 times more volatile than Api Growth Fund. It trades about 0.24 of its potential returns per unit of risk. Api Growth Fund is currently generating about 0.24 per unit of risk. If you would invest  39,245  in Home Depot on October 23, 2024 and sell it today you would earn a total of  1,693  from holding Home Depot or generate 4.31% return on investment over 90 days.

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

Home Depot  vs.  Api Growth Fund

Home Depot

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Api Growth Fund

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Api Growth Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Api Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Home Depot and Api Growth

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

The idea behind Home Depot and Api Growth Fund 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.