Correlation Between Home Depot and KBC Group

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

Diversification Opportunities for Home Depot and KBC Group

0.24

Correlation Coefficient

Home Depot  KBC Group

Modest diversification

The 3 months correlation between Home and KBC is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and KBC Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBC Group NV 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 KBC Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBC Group NV has no effect on the direction of Home Depot i.e., Home Depot and KBC Group go up and down completely randomly.

Pair Corralation between Home Depot and KBC Group

Assuming the 90 days trading horizon The Home Depot is expected to under-perform the KBC Group. In addition to that, Home Depot is 1.32 times more volatile than KBC Group NV. It trades about -0.37 of its total potential returns per unit of risk. KBC Group NV is currently generating about 0.39 per unit of volatility. If you would invest  6,984  in KBC Group NV on October 8, 2024 and sell it today you would earn a total of  436.00  from holding KBC Group NV or generate 6.24% return on investment over 90 days.

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

The Home Depot  vs.  KBC Group NV

Home Depot

Risk-Adjusted Performance

0 of 100

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 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.

KBC Group NV

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Group NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, KBC Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Home Depot and KBC Group

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

The idea behind The Home Depot and KBC Group NV 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.