Correlation Between Home Depot and Bm Technologies

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

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

Diversification Opportunities for Home Depot and Bm Technologies

-0.75

Correlation Coefficient

Home Depot  Bm Technologies

Pay attention - limited upside

The 3 months correlation between Home and BMTX is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Bm Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bm Technologies 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 Bm Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bm Technologies has no effect on the direction of Home Depot i.e., Home Depot and Bm Technologies go up and down completely randomly.

Pair Corralation between Home Depot and Bm Technologies

Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Bm Technologies. In addition to that, Home Depot is 3.78 times more volatile than Bm Technologies. It trades about -0.12 of its total potential returns per unit of risk. Bm Technologies is currently generating about 0.33 per unit of volatility. If you would invest  484.00  in Bm Technologies on December 22, 2024 and sell it today you would earn a total of  16.00  from holding Bm Technologies or generate 3.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	45.0%
Values	Daily Returns

Home Depot  vs.  Bm Technologies

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.

Bm Technologies

Risk-Adjusted Performance

Solid

Over the last 90 days Bm Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Bm Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Home Depot and Bm Technologies

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

The idea behind Home Depot and Bm Technologies 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.