Correlation Between Metro and HOME DEPOT
Can any of the company-specific risk be diversified away by investing in both Metro 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 Metro and HOME DEPOT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Inc and HOME DEPOT CDR, you can compare the effects of market volatilities on Metro 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 Metro with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro and HOME DEPOT.
Diversification Opportunities for Metro and HOME DEPOT
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Metro and HOME is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Metro Inc and HOME DEPOT CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT CDR and Metro 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 Metro Inc 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 CDR has no effect on the direction of Metro i.e., Metro and HOME DEPOT go up and down completely randomly.
Pair Corralation between Metro and HOME DEPOT
Assuming the 90 days trading horizon Metro Inc is expected to generate 0.64 times more return on investment than HOME DEPOT. However, Metro Inc is 1.56 times less risky than HOME DEPOT. It trades about 0.46 of its potential returns per unit of risk. HOME DEPOT CDR is currently generating about 0.18 per unit of risk. If you would invest 8,240 in Metro Inc on August 28, 2024 and sell it today you would earn a total of 877.00 from holding Metro Inc or generate 10.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Inc vs. HOME DEPOT CDR
Performance |
| Timeline |
| Metro Inc |
| HOME DEPOT CDR |
Metro and HOME DEPOT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro and HOME DEPOT
The main advantage of trading using opposite Metro and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro 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.| Metro vs. Loblaw Companies Limited | Metro vs. Saputo Inc | Metro vs. Empire Company Limited | Metro vs. Dollarama |
| HOME DEPOT vs. HPQ Silicon Resources | HOME DEPOT vs. Quorum Information Technologies | HOME DEPOT vs. CVW CleanTech | HOME DEPOT vs. Data Communications Management |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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