Correlation Between Home Depot and GMxico Transportes
Can any of the company-specific risk be diversified away by investing in both Home Depot and GMxico Transportes 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 GMxico Transportes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Home Depot and GMxico Transportes SAB, you can compare the effects of market volatilities on Home Depot and GMxico Transportes 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 GMxico Transportes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and GMxico Transportes.
Diversification Opportunities for Home Depot and GMxico Transportes
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and GMxico is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and GMxico Transportes SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMxico Transportes SAB 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 The Home Depot are associated (or correlated) with GMxico Transportes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMxico Transportes SAB has no effect on the direction of Home Depot i.e., Home Depot and GMxico Transportes go up and down completely randomly.
Pair Corralation between Home Depot and GMxico Transportes
Assuming the 90 days horizon The Home Depot is expected to generate 0.93 times more return on investment than GMxico Transportes. However, The Home Depot is 1.08 times less risky than GMxico Transportes. It trades about 0.06 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about -0.01 per unit of risk. If you would invest 568,425 in The Home Depot on November 2, 2024 and sell it today you would earn a total of 283,075 from holding The Home Depot or generate 49.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. GMxico Transportes SAB
Performance |
| Timeline |
| Home Depot |
| GMxico Transportes SAB |
Home Depot and GMxico Transportes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and GMxico Transportes
The main advantage of trading using opposite Home Depot and GMxico Transportes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, GMxico Transportes 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 GMxico Transportes will offset losses from the drop in GMxico Transportes' long position.| Home Depot vs. Southern Copper | Home Depot vs. Capital One Financial | Home Depot vs. Verizon Communications | Home Depot vs. Genworth Financial |
| GMxico Transportes vs. Taiwan Semiconductor Manufacturing | GMxico Transportes vs. Genworth Financial | GMxico Transportes vs. Capital One Financial | GMxico Transportes vs. CVS Health |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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