Correlation Between Home Depot and Capital Metals
Can any of the company-specific risk be diversified away by investing in both Home Depot and Capital Metals 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 Capital Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Capital Metals PLC, you can compare the effects of market volatilities on Home Depot and Capital Metals 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 Capital Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Capital Metals.
Diversification Opportunities for Home Depot and Capital Metals
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and Capital is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Capital Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Metals 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 Capital Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Metals PLC has no effect on the direction of Home Depot i.e., Home Depot and Capital Metals go up and down completely randomly.
Pair Corralation between Home Depot and Capital Metals
Assuming the 90 days trading horizon Home Depot is expected to generate 15.85 times less return on investment than Capital Metals. But when comparing it to its historical volatility, Home Depot is 44.38 times less risky than Capital Metals. It trades about 0.09 of its potential returns per unit of risk. Capital Metals PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 253.00 in Capital Metals PLC on September 3, 2024 and sell it today you would lose (68.00) from holding Capital Metals PLC or give up 26.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Home Depot vs. Capital Metals PLC
Performance |
| Timeline |
| Home Depot |
| Capital Metals PLC |
Home Depot and Capital Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Capital Metals
The main advantage of trading using opposite Home Depot and Capital Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Capital Metals 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 Capital Metals will offset losses from the drop in Capital Metals' long position.| Home Depot vs. Rockfire Resources plc | Home Depot vs. Tlou Energy | Home Depot vs. Falcon Oil Gas | Home Depot vs. Helium One Global |
| Capital Metals vs. Playtech Plc | Capital Metals vs. GoldMining | Capital Metals vs. Gamma Communications PLC | Capital Metals vs. Caledonia Mining |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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