Correlation Between Home Depot and SOCGEN

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

By analyzing existing cross correlation between Home Depot and SOCGEN 2889 09 JUN 32, you can compare the effects of market volatilities on Home Depot and SOCGEN 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 SOCGEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and SOCGEN.

Diversification Opportunities for Home Depot and SOCGEN

-0.23

Correlation Coefficient

Home Depot  SOCGEN

Very good diversification

The 3 months correlation between Home and SOCGEN is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and SOCGEN 2889 09 JUN 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOCGEN 2889 09 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 SOCGEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOCGEN 2889 09 has no effect on the direction of Home Depot i.e., Home Depot and SOCGEN go up and down completely randomly.

Pair Corralation between Home Depot and SOCGEN

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.19 times more return on investment than SOCGEN. However, Home Depot is 1.19 times more volatile than SOCGEN 2889 09 JUN 32. It trades about -0.08 of its potential returns per unit of risk. SOCGEN 2889 09 JUN 32 is currently generating about -0.15 per unit of risk. If you would invest  38,697  in Home Depot on December 30, 2024 and sell it today you would lose (2,882) from holding Home Depot or give up 7.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	51.61%
Values	Daily Returns

Home Depot  vs.  SOCGEN 2889 09 JUN 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.

SOCGEN 2889 09

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOCGEN 2889 09 JUN 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SOCGEN 2889 09 JUN 32 investors.

Pair Trading with Home Depot and SOCGEN

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

The idea behind Home Depot and SOCGEN 2889 09 JUN 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.