Correlation Between Home Depot and Quizam Media

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

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

Diversification Opportunities for Home Depot and Quizam Media

-0.35

Correlation Coefficient

Home Depot  Quizam Media

Very good diversification

The 3 months correlation between Home and Quizam is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Quizam Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quizam Media 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 Quizam Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quizam Media has no effect on the direction of Home Depot i.e., Home Depot and Quizam Media go up and down completely randomly.

Pair Corralation between Home Depot and Quizam Media

Allowing for the 90-day total investment horizon Home Depot is expected to generate 14.15 times less return on investment than Quizam Media. But when comparing it to its historical volatility, Home Depot is 12.6 times less risky than Quizam Media. It trades about 0.06 of its potential returns per unit of risk. Quizam Media is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.93  in Quizam Media on December 4, 2024 and sell it today you would lose (0.31) from holding Quizam Media or give up 7.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Home Depot  vs.  Quizam Media

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.

Quizam Media

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quizam Media are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Quizam Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Depot and Quizam Media

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

The idea behind Home Depot and Quizam Media 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.