Correlation Between UPS CDR and HOME DEPOT

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

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

Diversification Opportunities for UPS CDR and HOME DEPOT

0.25

Correlation Coefficient

UPS CDR  HOME DEPOT

Modest diversification

The 3 months correlation between UPS and HOME is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding UPS CDR 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 UPS CDR 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 UPS CDR 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 UPS CDR i.e., UPS CDR and HOME DEPOT go up and down completely randomly.

Pair Corralation between UPS CDR and HOME DEPOT

Assuming the 90 days trading horizon UPS CDR is expected to under-perform the HOME DEPOT. In addition to that, UPS CDR is 1.51 times more volatile than HOME DEPOT CDR. It trades about -0.09 of its total potential returns per unit of risk. HOME DEPOT CDR is currently generating about -0.09 per unit of volatility. If you would invest  2,515  in HOME DEPOT CDR on December 26, 2024 and sell it today you would lose (202.00) from holding HOME DEPOT CDR or give up 8.03% of portfolio value over 90 days.

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

UPS CDR  vs.  HOME DEPOT CDR

UPS CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days UPS CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

HOME DEPOT CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days HOME DEPOT CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with UPS CDR and HOME DEPOT

The main advantage of trading using opposite UPS CDR and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPS CDR 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 UPS CDR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.