Correlation Between Home Depot and Protokinetix

Can any of the company-specific risk be diversified away by investing in both Home Depot and Protokinetix 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 Protokinetix into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Depot and Protokinetix, you can compare the effects of market volatilities on Home Depot and Protokinetix 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 Protokinetix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Protokinetix.

Diversification Opportunities for Home Depot and Protokinetix

-0.63

Correlation Coefficient

Home Depot  Protokinetix

Excellent diversification

The 3 months correlation between Home and Protokinetix is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Protokinetix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protokinetix 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 Protokinetix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Protokinetix has no effect on the direction of Home Depot i.e., Home Depot and Protokinetix go up and down completely randomly.

Pair Corralation between Home Depot and Protokinetix

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.12 times less return on investment than Protokinetix. But when comparing it to its historical volatility, Home Depot is 12.26 times less risky than Protokinetix. It trades about 0.23 of its potential returns per unit of risk. Protokinetix is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1.40  in Protokinetix on September 3, 2024 and sell it today you would lose (0.51) from holding Protokinetix or give up 36.43% of portfolio value over 90 days.

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

Home Depot  vs.  Protokinetix

Home Depot

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 18 (%) 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.

Protokinetix

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Protokinetix are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Protokinetix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Depot and Protokinetix

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

The idea behind Home Depot and Protokinetix 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.