Correlation Between Home Depot and Pampa Energía

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

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

Diversification Opportunities for Home Depot and Pampa Energía

0.54

Correlation Coefficient

Home Depot  Pampa Energía

Very weak diversification

The 3 months correlation between Home and Pampa is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Pampa Energa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energa SA 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 The Home Depot are associated (or correlated) with Pampa Energía. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energa SA has no effect on the direction of Home Depot i.e., Home Depot and Pampa Energía go up and down completely randomly.

Pair Corralation between Home Depot and Pampa Energía

Assuming the 90 days trading horizon The Home Depot is expected to under-perform the Pampa Energía. But the stock apears to be less risky and, when comparing its historical volatility, The Home Depot is 2.26 times less risky than Pampa Energía. The stock trades about -0.12 of its potential returns per unit of risk. The Pampa Energa SA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  8,400  in Pampa Energa SA on December 21, 2024 and sell it today you would lose (1,150) from holding Pampa Energa SA or give up 13.69% of portfolio value over 90 days.

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

The Home Depot  vs.  Pampa Energa SA

Home Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pampa Energa SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pampa Energa SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Home Depot and Pampa Energía

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

The idea behind The Home Depot and Pampa Energa SA 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.