Correlation Between Canadian Utilities and HOME DEPOT
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities 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 Canadian Utilities and HOME DEPOT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Ltd and HOME DEPOT CDR, you can compare the effects of market volatilities on Canadian Utilities 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 Canadian Utilities with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and HOME DEPOT.
Diversification Opportunities for Canadian Utilities and HOME DEPOT
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Canadian and HOME is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Ltd 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 Canadian Utilities 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 Canadian Utilities Ltd 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 Canadian Utilities i.e., Canadian Utilities and HOME DEPOT go up and down completely randomly.
Pair Corralation between Canadian Utilities and HOME DEPOT
Assuming the 90 days trading horizon Canadian Utilities is expected to generate 1.55 times less return on investment than HOME DEPOT. But when comparing it to its historical volatility, Canadian Utilities Ltd is 1.43 times less risky than HOME DEPOT. It trades about 0.07 of its potential returns per unit of risk. HOME DEPOT CDR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,091 in HOME DEPOT CDR on August 29, 2024 and sell it today you would earn a total of 664.00 from holding HOME DEPOT CDR or generate 31.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Ltd vs. HOME DEPOT CDR
Performance |
| Timeline |
| Canadian Utilities |
| HOME DEPOT CDR |
Canadian Utilities and HOME DEPOT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and HOME DEPOT
The main advantage of trading using opposite Canadian Utilities and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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.| Canadian Utilities vs. Forstrong Global Income | Canadian Utilities vs. Terreno Resources Corp | Canadian Utilities vs. iShares Canadian HYBrid | Canadian Utilities vs. Brompton European Dividend |
| HOME DEPOT vs. Eros Resources Corp | HOME DEPOT vs. Apple Inc CDR | HOME DEPOT vs. European Residential Real | HOME DEPOT vs. Canadian Utilities Ltd |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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