Correlation Between Home Depot and Klépierre

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

Diversification Opportunities for Home Depot and Klépierre

-0.54

Correlation Coefficient

Home Depot  Klépierre

Excellent diversification

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

Pair Corralation between Home Depot and Klépierre

Assuming the 90 days trading horizon The Home Depot is expected to generate 1.51 times more return on investment than Klépierre. However, Home Depot is 1.51 times more volatile than Klpierre SA. It trades about 0.1 of its potential returns per unit of risk. Klpierre SA is currently generating about -0.1 per unit of risk. If you would invest  35,681  in The Home Depot on October 7, 2024 and sell it today you would earn a total of  1,904  from holding The Home Depot or generate 5.34% return on investment over 90 days.

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

The Home Depot  vs.  Klpierre SA

Home Depot

Risk-Adjusted Performance

1 of 100

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Klpierre SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Klpierre SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Klépierre is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Home Depot and Klépierre

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

The idea behind The Home Depot and Klpierre 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.