Correlation Between Home Depot and Antofagasta PLC

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Can any of the company-specific risk be diversified away by investing in both Home Depot and Antofagasta PLC 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 Antofagasta PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Antofagasta PLC, you can compare the effects of market volatilities on Home Depot and Antofagasta PLC 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 Antofagasta PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Antofagasta PLC.

Diversification Opportunities for Home Depot and Antofagasta PLC

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Home and Antofagasta is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Antofagasta PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antofagasta PLC 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 Home Depot are associated (or correlated) with Antofagasta PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antofagasta PLC has no effect on the direction of Home Depot i.e., Home Depot and Antofagasta PLC go up and down completely randomly.

Pair Corralation between Home Depot and Antofagasta PLC

Assuming the 90 days trading horizon Home Depot is expected to generate 1.49 times less return on investment than Antofagasta PLC. But when comparing it to its historical volatility, Home Depot is 9.63 times less risky than Antofagasta PLC. It trades about 0.09 of its potential returns per unit of risk. Antofagasta PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  156,132  in Antofagasta PLC on September 23, 2024 and sell it today you would earn a total of  5,218  from holding Antofagasta PLC or generate 3.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.4%
ValuesDaily Returns

Home Depot  vs.  Antofagasta PLC

 Performance 
       Timeline  
Home Depot 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Home Depot is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
Antofagasta PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Antofagasta PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Home Depot and Antofagasta PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and Antofagasta PLC

The main advantage of trading using opposite Home Depot and Antofagasta PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Antofagasta PLC 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 Antofagasta PLC will offset losses from the drop in Antofagasta PLC's long position.
The idea behind Home Depot and Antofagasta PLC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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