Correlation Between Home Depot and HORNBACH Baumarkt

Can any of the company-specific risk be diversified away by investing in both Home Depot and HORNBACH Baumarkt 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 HORNBACH Baumarkt 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 HORNBACH Baumarkt AG, you can compare the effects of market volatilities on Home Depot and HORNBACH Baumarkt 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 HORNBACH Baumarkt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and HORNBACH Baumarkt.

Diversification Opportunities for Home Depot and HORNBACH Baumarkt

0.13

Correlation Coefficient

Home Depot  HORNBACH Baumarkt

Average diversification

The 3 months correlation between Home and HORNBACH is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and HORNBACH Baumarkt AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HORNBACH Baumarkt 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 HORNBACH Baumarkt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HORNBACH Baumarkt has no effect on the direction of Home Depot i.e., Home Depot and HORNBACH Baumarkt go up and down completely randomly.

Pair Corralation between Home Depot and HORNBACH Baumarkt

Assuming the 90 days trading horizon Home Depot is expected to generate 9.33 times less return on investment than HORNBACH Baumarkt. But when comparing it to its historical volatility, The Home Depot is 1.27 times less risky than HORNBACH Baumarkt. It trades about 0.02 of its potential returns per unit of risk. HORNBACH Baumarkt AG is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,450  in HORNBACH Baumarkt AG on October 8, 2024 and sell it today you would earn a total of  600.00  from holding HORNBACH Baumarkt AG or generate 11.01% return on investment over 90 days.

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

The Home Depot  vs.  HORNBACH Baumarkt AG

Home Depot

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Home Depot are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Home Depot is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

HORNBACH Baumarkt

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HORNBACH Baumarkt AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, HORNBACH Baumarkt may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Home Depot and HORNBACH Baumarkt

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

The idea behind The Home Depot and HORNBACH Baumarkt AG 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.