Correlation Between OFFICE DEPOT and Federal Signal

Can any of the company-specific risk be diversified away by investing in both OFFICE DEPOT and Federal Signal 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 OFFICE DEPOT and Federal Signal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OFFICE DEPOT and Federal Signal, you can compare the effects of market volatilities on OFFICE DEPOT and Federal Signal 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 OFFICE DEPOT with a short position of Federal Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of OFFICE DEPOT and Federal Signal.

Diversification Opportunities for OFFICE DEPOT and Federal Signal

0.0

Correlation Coefficient

OFFICE DEPOT  Federal Signal

Pay attention - limited upside

The 3 months correlation between OFFICE and Federal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding OFFICE DEPOT and Federal Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Signal and OFFICE 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 OFFICE DEPOT are associated (or correlated) with Federal Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Signal has no effect on the direction of OFFICE DEPOT i.e., OFFICE DEPOT and Federal Signal go up and down completely randomly.

Pair Corralation between OFFICE DEPOT and Federal Signal

If you would invest  1,920  in OFFICE DEPOT on December 21, 2024 and sell it today you would earn a total of  0.00  from holding OFFICE DEPOT or generate 0.0% return on investment over 90 days.

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

OFFICE DEPOT  vs.  Federal Signal

OFFICE DEPOT

Risk-Adjusted Performance

Very Weak

Over the last 90 days OFFICE DEPOT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, OFFICE DEPOT is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Federal Signal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Signal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with OFFICE DEPOT and Federal Signal

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

The idea behind OFFICE DEPOT and Federal Signal 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.