Correlation Between Home Depot and ContraFect Corp

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

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

Diversification Opportunities for Home Depot and ContraFect Corp

0.0

Correlation Coefficient

Home Depot  ContraFect Corp

Pay attention - limited upside

The 3 months correlation between Home and ContraFect is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ContraFect Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ContraFect 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 ContraFect Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ContraFect Corp has no effect on the direction of Home Depot i.e., Home Depot and ContraFect Corp go up and down completely randomly.

Pair Corralation between Home Depot and ContraFect Corp

If you would invest (100.00) in ContraFect Corp on December 28, 2024 and sell it today you would earn a total of  100.00  from holding ContraFect Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Home Depot  vs.  ContraFect Corp

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 uncertain 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.

ContraFect Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ContraFect Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ContraFect Corp 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 ContraFect Corp

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

The idea behind Home Depot and ContraFect 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.