Correlation Between Grupo KUO and Home Depot

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

By analyzing existing cross correlation between Grupo KUO SAB and The Home Depot, you can compare the effects of market volatilities on Grupo KUO and Home Depot 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 Grupo KUO with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo KUO and Home Depot.

Diversification Opportunities for Grupo KUO and Home Depot

-0.02

Correlation Coefficient

Grupo KUO  Home Depot

Good diversification

The 3 months correlation between Grupo and Home is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Grupo KUO SAB and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Grupo KUO 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 Grupo KUO SAB are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Grupo KUO i.e., Grupo KUO and Home Depot go up and down completely randomly.

Pair Corralation between Grupo KUO and Home Depot

Assuming the 90 days trading horizon Grupo KUO SAB is expected to generate 2.22 times more return on investment than Home Depot. However, Grupo KUO is 2.22 times more volatile than The Home Depot. It trades about 0.24 of its potential returns per unit of risk. The Home Depot is currently generating about -0.39 per unit of risk. If you would invest  4,116  in Grupo KUO SAB on October 9, 2024 and sell it today you would earn a total of  484.00  from holding Grupo KUO SAB or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Grupo KUO SAB  vs.  The Home Depot

Grupo KUO SAB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo KUO SAB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Grupo KUO may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 fairly strong primary indicators, Home Depot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grupo KUO and Home Depot

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

The idea behind Grupo KUO SAB and The Home Depot 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.