Correlation Between Home Depot and CSLAU

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

By analyzing existing cross correlation between Home Depot and CSLAU 425 27 APR 32, you can compare the effects of market volatilities on Home Depot and CSLAU 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 CSLAU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and CSLAU.

Diversification Opportunities for Home Depot and CSLAU

-0.34

Correlation Coefficient

Home Depot  CSLAU

Very good diversification

The 3 months correlation between Home and CSLAU is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and CSLAU 425 27 APR 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSLAU 425 27 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 CSLAU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSLAU 425 27 has no effect on the direction of Home Depot i.e., Home Depot and CSLAU go up and down completely randomly.

Pair Corralation between Home Depot and CSLAU

Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the CSLAU. In addition to that, Home Depot is 1.71 times more volatile than CSLAU 425 27 APR 32. It trades about -0.08 of its total potential returns per unit of risk. CSLAU 425 27 APR 32 is currently generating about 0.04 per unit of volatility. If you would invest  9,418  in CSLAU 425 27 APR 32 on December 30, 2024 and sell it today you would earn a total of  146.00  from holding CSLAU 425 27 APR 32 or generate 1.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.58%
Values	Daily Returns

Home Depot  vs.  CSLAU 425 27 APR 32

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.

CSLAU 425 27

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSLAU 425 27 APR 32 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CSLAU is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Home Depot and CSLAU

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

The idea behind Home Depot and CSLAU 425 27 APR 32 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.