Correlation Between Home Depot and Belong Acquisition

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

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

Diversification Opportunities for Home Depot and Belong Acquisition

-0.72

Correlation Coefficient

Home Depot  Belong Acquisition

Pay attention - limited upside

The 3 months correlation between Home and Belong is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Belong Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Belong Acquisition 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 are associated (or correlated) with Belong Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Belong Acquisition Corp has no effect on the direction of Home Depot i.e., Home Depot and Belong Acquisition go up and down completely randomly.

Pair Corralation between Home Depot and Belong Acquisition

Allowing for the 90-day total investment horizon Home Depot is expected to generate 92.97 times less return on investment than Belong Acquisition. But when comparing it to its historical volatility, Home Depot is 54.26 times less risky than Belong Acquisition. It trades about 0.06 of its potential returns per unit of risk. Belong Acquisition Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Belong Acquisition Corp on September 14, 2024 and sell it today you would lose (42.94) from holding Belong Acquisition Corp or give up 99.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	17.37%
Values	Daily Returns

Home Depot  vs.  Belong Acquisition Corp

Home Depot

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Belong Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Belong Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Belong Acquisition is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Home Depot and Belong Acquisition

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

The idea behind Home Depot and Belong Acquisition 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.