Correlation Between Rover Metals and HOME DEPOT

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

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

Diversification Opportunities for Rover Metals and HOME DEPOT

-0.36

Correlation Coefficient

Rover Metals  HOME DEPOT

Very good diversification

The 3 months correlation between Rover and HOME is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Rover Metals Corp and HOME DEPOT CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT CDR and Rover Metals 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 Rover Metals Corp 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 CDR has no effect on the direction of Rover Metals i.e., Rover Metals and HOME DEPOT go up and down completely randomly.

Pair Corralation between Rover Metals and HOME DEPOT

Assuming the 90 days trading horizon Rover Metals Corp is not expected to generate positive returns. Moreover, Rover Metals is 16.33 times more volatile than HOME DEPOT CDR. It trades away all of its potential returns to assume current level of volatility. HOME DEPOT CDR is currently generating about 0.19 per unit of risk. If you would invest  2,589  in HOME DEPOT CDR on September 13, 2024 and sell it today you would earn a total of  133.00  from holding HOME DEPOT CDR or generate 5.14% return on investment over 90 days.

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

Rover Metals Corp  vs.  HOME DEPOT CDR

Rover Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rover Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Rover Metals is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

HOME DEPOT CDR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HOME DEPOT CDR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, HOME DEPOT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rover Metals and HOME DEPOT

The main advantage of trading using opposite Rover Metals and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rover Metals 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 Rover Metals Corp and HOME DEPOT CDR 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 Transaction History module to view history of all your transactions and understand their impact on performance.