Correlation Between Home Depot and J Long

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

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

Diversification Opportunities for Home Depot and J Long

-0.5

Correlation Coefficient

Home Depot  J Long

Very good diversification

The 3 months correlation between Home and J Long is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and J Long Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Long Group 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 J Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Long Group has no effect on the direction of Home Depot i.e., Home Depot and J Long go up and down completely randomly.

Pair Corralation between Home Depot and J Long

Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the J Long. But the stock apears to be less risky and, when comparing its historical volatility, Home Depot is 4.39 times less risky than J Long. The stock trades about -0.22 of its potential returns per unit of risk. The J Long Group Limited is currently generating about 0.66 of returns per unit of risk over similar time horizon. If you would invest  286.00  in J Long Group Limited on October 15, 2024 and sell it today you would earn a total of  231.00  from holding J Long Group Limited or generate 80.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Home Depot  vs.  J Long Group Limited

Home Depot

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

J Long Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in J Long Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, J Long disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Depot and J Long

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

The idea behind Home Depot and J Long Group Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.