Correlation Between Home Depot and Television Broadcasts

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

Diversification Opportunities for Home Depot and Television Broadcasts

-0.44

Correlation Coefficient

Home Depot  Television Broadcasts

Very good diversification

The 3 months correlation between Home and Television is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Television Broadcasts Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Television Broadcasts 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 Television Broadcasts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Television Broadcasts has no effect on the direction of Home Depot i.e., Home Depot and Television Broadcasts go up and down completely randomly.

Pair Corralation between Home Depot and Television Broadcasts

Assuming the 90 days trading horizon The Home Depot is expected to under-perform the Television Broadcasts. But the stock apears to be less risky and, when comparing its historical volatility, The Home Depot is 1.5 times less risky than Television Broadcasts. The stock trades about -0.38 of its potential returns per unit of risk. The Television Broadcasts Limited is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Television Broadcasts Limited on October 10, 2024 and sell it today you would lose (2.00) from holding Television Broadcasts Limited or give up 5.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

The Home Depot  vs.  Television Broadcasts Limited

Home Depot

Risk-Adjusted Performance

0 of 100

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 comparatively stable forward indicators, Home Depot is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Television Broadcasts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Television Broadcasts Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Home Depot and Television Broadcasts

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

The idea behind The Home Depot and Television Broadcasts 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.