Correlation Between Home Depot and BCECN

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Can any of the company-specific risk be diversified away by investing in both Home Depot and BCECN 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 BCECN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and BCECN 215 15 FEB 32, you can compare the effects of market volatilities on Home Depot and BCECN 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 BCECN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and BCECN.

Diversification Opportunities for Home Depot and BCECN

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Home and BCECN is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and BCECN 215 15 FEB 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCECN 215 15 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 BCECN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCECN 215 15 has no effect on the direction of Home Depot i.e., Home Depot and BCECN go up and down completely randomly.

Pair Corralation between Home Depot and BCECN

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.46 times more return on investment than BCECN. However, Home Depot is 1.46 times more volatile than BCECN 215 15 FEB 32. It trades about 0.08 of its potential returns per unit of risk. BCECN 215 15 FEB 32 is currently generating about 0.0 per unit of risk. If you would invest  30,742  in Home Depot on September 12, 2024 and sell it today you would earn a total of  11,517  from holding Home Depot or generate 37.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy74.43%
ValuesDaily Returns

Home Depot  vs.  BCECN 215 15 FEB 32

 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 weak fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.
BCECN 215 15 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BCECN 215 15 FEB 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for BCECN 215 15 FEB 32 stockholders.

Home Depot and BCECN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and BCECN

The main advantage of trading using opposite Home Depot and BCECN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, BCECN 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 BCECN will offset losses from the drop in BCECN's long position.
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The idea behind Home Depot and BCECN 215 15 FEB 32 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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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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