Correlation Between HOME DEPOT and Advent Wireless

Can any of the company-specific risk be diversified away by investing in both HOME DEPOT and Advent Wireless 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 Advent Wireless 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 Advent Wireless, you can compare the effects of market volatilities on HOME DEPOT and Advent Wireless 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 Advent Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and Advent Wireless.

Diversification Opportunities for HOME DEPOT and Advent Wireless

0.54

Correlation Coefficient

HOME DEPOT  Advent Wireless

Very weak diversification

The 3 months correlation between HOME and Advent is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Advent Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Wireless 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 Advent Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Wireless has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Advent Wireless go up and down completely randomly.

Pair Corralation between HOME DEPOT and Advent Wireless

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 0.38 times more return on investment than Advent Wireless. However, HOME DEPOT CDR is 2.65 times less risky than Advent Wireless. It trades about 0.09 of its potential returns per unit of risk. Advent Wireless is currently generating about 0.02 per unit of risk. If you would invest  1,874  in HOME DEPOT CDR on October 1, 2024 and sell it today you would earn a total of  657.00  from holding HOME DEPOT CDR or generate 35.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.65%
Values	Daily Returns

HOME DEPOT CDR  vs.  Advent Wireless

HOME DEPOT CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HOME DEPOT CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, HOME DEPOT is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Advent Wireless

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Wireless are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Advent Wireless may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HOME DEPOT and Advent Wireless

The main advantage of trading using opposite HOME DEPOT and Advent Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HOME DEPOT position performs unexpectedly, Advent Wireless 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 Advent Wireless will offset losses from the drop in Advent Wireless' long position.

The idea behind HOME DEPOT CDR and Advent Wireless 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.