Correlation Between Home Depot and BNY Mellon

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Can any of the company-specific risk be diversified away by investing in both Home Depot and BNY Mellon 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 BNY Mellon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and BNY Mellon Mid, you can compare the effects of market volatilities on Home Depot and BNY Mellon 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 BNY Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and BNY Mellon.

Diversification Opportunities for Home Depot and BNY Mellon

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Home and BNY is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and BNY Mellon Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon Mid 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 BNY Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNY Mellon Mid has no effect on the direction of Home Depot i.e., Home Depot and BNY Mellon go up and down completely randomly.

Pair Corralation between Home Depot and BNY Mellon

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.03 times less return on investment than BNY Mellon. In addition to that, Home Depot is 1.33 times more volatile than BNY Mellon Mid. It trades about 0.06 of its total potential returns per unit of risk. BNY Mellon Mid is currently generating about 0.08 per unit of volatility. If you would invest  7,732  in BNY Mellon Mid on September 5, 2024 and sell it today you would earn a total of  3,252  from holding BNY Mellon Mid or generate 42.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  BNY Mellon Mid

 Performance 
       Timeline  
Home Depot 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.
BNY Mellon Mid 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon Mid are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, BNY Mellon exhibited solid returns over the last few months and may actually be approaching a breakup point.

Home Depot and BNY Mellon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and BNY Mellon

The main advantage of trading using opposite Home Depot and BNY Mellon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, BNY Mellon 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 BNY Mellon will offset losses from the drop in BNY Mellon's long position.
The idea behind Home Depot and BNY Mellon Mid 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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