Correlation Between HOME DEPOT and TeraGo

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

Diversification Opportunities for HOME DEPOT and TeraGo

-0.68

Correlation Coefficient

HOME DEPOT  TeraGo

Excellent diversification

The 3 months correlation between HOME and TeraGo is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and TeraGo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TeraGo Inc 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 TeraGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TeraGo Inc has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and TeraGo go up and down completely randomly.

Pair Corralation between HOME DEPOT and TeraGo

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 0.38 times more return on investment than TeraGo. However, HOME DEPOT CDR is 2.66 times less risky than TeraGo. It trades about 0.12 of its potential returns per unit of risk. TeraGo Inc is currently generating about -0.24 per unit of risk. If you would invest  2,461  in HOME DEPOT CDR on September 16, 2024 and sell it today you would earn a total of  230.00  from holding HOME DEPOT CDR or generate 9.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

HOME DEPOT CDR  vs.  TeraGo Inc

HOME DEPOT CDR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HOME DEPOT CDR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, HOME DEPOT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TeraGo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TeraGo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with HOME DEPOT and TeraGo

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

The idea behind HOME DEPOT CDR and TeraGo Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.