Correlation Between Home Depot and UTime

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

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

Diversification Opportunities for Home Depot and UTime

0.23

Correlation Coefficient

Home Depot  UTime

Modest diversification

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

Pair Corralation between Home Depot and UTime

Allowing for the 90-day total investment horizon Home Depot is expected to generate 2.2 times less return on investment than UTime. But when comparing it to its historical volatility, Home Depot is 11.08 times less risky than UTime. It trades about 0.07 of its potential returns per unit of risk. UTime Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,175  in UTime Limited on December 2, 2024 and sell it today you would lose (2,152) from holding UTime Limited or give up 98.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Home Depot  vs.  UTime Limited

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.

UTime Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days UTime Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Home Depot and UTime

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

The idea behind Home Depot and UTime 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.