Correlation Between Home Depot and Pegasus Tel

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Can any of the company-specific risk be diversified away by investing in both Home Depot and Pegasus Tel 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 Pegasus Tel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Pegasus Tel, you can compare the effects of market volatilities on Home Depot and Pegasus Tel 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 Pegasus Tel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Pegasus Tel.

Diversification Opportunities for Home Depot and Pegasus Tel

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Home and Pegasus is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Pegasus Tel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegasus Tel 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 Pegasus Tel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegasus Tel has no effect on the direction of Home Depot i.e., Home Depot and Pegasus Tel go up and down completely randomly.

Pair Corralation between Home Depot and Pegasus Tel

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.15 times more return on investment than Pegasus Tel. However, Home Depot is 6.63 times less risky than Pegasus Tel. It trades about 0.13 of its potential returns per unit of risk. Pegasus Tel is currently generating about -0.02 per unit of risk. If you would invest  40,268  in Home Depot on August 25, 2024 and sell it today you would earn a total of  1,732  from holding Home Depot or generate 4.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  Pegasus Tel

 Performance 
       Timeline  
Home Depot 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Pegasus Tel 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Pegasus Tel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Pegasus Tel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Home Depot and Pegasus Tel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and Pegasus Tel

The main advantage of trading using opposite Home Depot and Pegasus Tel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Pegasus Tel 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 Pegasus Tel will offset losses from the drop in Pegasus Tel's long position.
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The idea behind Home Depot and Pegasus Tel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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