Correlation Between HOME DEPOT and Bausch Health
Can any of the company-specific risk be diversified away by investing in both HOME DEPOT and Bausch Health 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 Bausch Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HOME DEPOT CDR and Bausch Health Companies, you can compare the effects of market volatilities on HOME DEPOT and Bausch Health 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 Bausch Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and Bausch Health.
Diversification Opportunities for HOME DEPOT and Bausch Health
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between HOME and Bausch is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Bausch Health Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Health Companies 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 CDR are associated (or correlated) with Bausch Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Health Companies has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Bausch Health go up and down completely randomly.
Pair Corralation between HOME DEPOT and Bausch Health
Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 0.54 times more return on investment than Bausch Health. However, HOME DEPOT CDR is 1.86 times less risky than Bausch Health. It trades about 0.07 of its potential returns per unit of risk. Bausch Health Companies is currently generating about -0.13 per unit of risk. If you would invest 2,496 in HOME DEPOT CDR on November 6, 2024 and sell it today you would earn a total of 130.00 from holding HOME DEPOT CDR or generate 5.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HOME DEPOT CDR vs. Bausch Health Companies
Performance |
| Timeline |
| HOME DEPOT CDR |
| Bausch Health Companies |
HOME DEPOT and Bausch Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HOME DEPOT and Bausch Health
The main advantage of trading using opposite HOME DEPOT and Bausch Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HOME DEPOT position performs unexpectedly, Bausch Health 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 Bausch Health will offset losses from the drop in Bausch Health's long position.| HOME DEPOT vs. Micron Technology, | HOME DEPOT vs. Calian Technologies | HOME DEPOT vs. CVW CleanTech | HOME DEPOT vs. Firan Technology Group |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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