Correlation Between European Metals and Home Depot
Can any of the company-specific risk be diversified away by investing in both European 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 European 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 European Metals Holdings and Home Depot, you can compare the effects of market volatilities on European 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 European Metals with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Home Depot.
Diversification Opportunities for European Metals and Home Depot
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between European and Home is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and European 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 European Metals Holdings 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 has no effect on the direction of European Metals i.e., European Metals and Home Depot go up and down completely randomly.
Pair Corralation between European Metals and Home Depot
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Home Depot. In addition to that, European Metals is 4.61 times more volatile than Home Depot. It trades about -0.07 of its total potential returns per unit of risk. Home Depot is currently generating about 0.03 per unit of volatility. If you would invest 16,400 in Home Depot on August 28, 2024 and sell it today you would earn a total of 1,457 from holding Home Depot or generate 8.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.16% |
| Values | Daily Returns |
European Metals Holdings vs. Home Depot
Performance |
| Timeline |
| European Metals Holdings |
| Home Depot |
European Metals and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Home Depot
The main advantage of trading using opposite European Metals and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European 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.| European Metals vs. Givaudan SA | European Metals vs. Antofagasta PLC | European Metals vs. Centamin PLC | European Metals vs. Atalaya Mining |
| Home Depot vs. Check Point Software | Home Depot vs. DXC Technology Co | Home Depot vs. Cognizant Technology Solutions | Home Depot vs. Take Two Interactive Software |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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