Correlation Between MQGAU and Home Depot

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Can any of the company-specific risk be diversified away by investing in both MQGAU 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 MQGAU and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MQGAU 2871 14 JAN 33 and Home Depot, you can compare the effects of market volatilities on MQGAU 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 MQGAU with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of MQGAU and Home Depot.

Diversification Opportunities for MQGAU and Home Depot

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between MQGAU and Home is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding MQGAU 2871 14 JAN 33 and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and MQGAU 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 MQGAU 2871 14 JAN 33 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 has no effect on the direction of MQGAU i.e., MQGAU and Home Depot go up and down completely randomly.

Pair Corralation between MQGAU and Home Depot

Assuming the 90 days trading horizon MQGAU 2871 14 JAN 33 is expected to under-perform the Home Depot. But the bond apears to be less risky and, when comparing its historical volatility, MQGAU 2871 14 JAN 33 is 1.04 times less risky than Home Depot. The bond trades about -0.02 of its potential returns per unit of risk. The Home Depot is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  31,866  in Home Depot on September 3, 2024 and sell it today you would earn a total of  10,830  from holding Home Depot or generate 33.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy59.11%
ValuesDaily Returns

MQGAU 2871 14 JAN 33  vs.  Home Depot

 Performance 
       Timeline  
MQGAU 2871 14 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MQGAU 2871 14 JAN 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for MQGAU 2871 14 JAN 33 investors.
Home Depot 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.

MQGAU and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MQGAU and Home Depot

The main advantage of trading using opposite MQGAU and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MQGAU 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.
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The idea behind MQGAU 2871 14 JAN 33 and Home Depot 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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