Correlation Between Home Depot and BRFSBZ

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

By analyzing existing cross correlation between Home Depot and BRFSBZ 575 21 SEP 50, you can compare the effects of market volatilities on Home Depot and BRFSBZ 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 BRFSBZ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and BRFSBZ.

Diversification Opportunities for Home Depot and BRFSBZ

0.61

Correlation Coefficient

Home Depot  BRFSBZ

Poor diversification

The 3 months correlation between Home and BRFSBZ is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and BRFSBZ 575 21 SEP 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRFSBZ 575 21 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 BRFSBZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRFSBZ 575 21 has no effect on the direction of Home Depot i.e., Home Depot and BRFSBZ go up and down completely randomly.

Pair Corralation between Home Depot and BRFSBZ

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.35 times more return on investment than BRFSBZ. However, Home Depot is 2.82 times less risky than BRFSBZ. It trades about 0.07 of its potential returns per unit of risk. BRFSBZ 575 21 SEP 50 is currently generating about -0.24 per unit of risk. If you would invest  40,804  in Home Depot on September 14, 2024 and sell it today you would earn a total of  638.00  from holding Home Depot or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	19.05%
Values	Daily Returns

Home Depot  vs.  BRFSBZ 575 21 SEP 50

Home Depot

Risk-Adjusted Performance

9 of 100

OK

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

BRFSBZ 575 21

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRFSBZ 575 21 SEP 50 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating 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 BRFSBZ 575 21 SEP 50 investors.

Pair Trading with Home Depot and BRFSBZ

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

The idea behind Home Depot and BRFSBZ 575 21 SEP 50 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.