Correlation Between Genomma Lab and Home Depot

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

By analyzing existing cross correlation between Genomma Lab Internacional and The Home Depot, you can compare the effects of market volatilities on Genomma Lab 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 Genomma Lab with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genomma Lab and Home Depot.

Diversification Opportunities for Genomma Lab and Home Depot

0.68

Correlation Coefficient

Genomma Lab  Home Depot

Poor diversification

The 3 months correlation between Genomma and Home is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Genomma Lab Internacional and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Genomma Lab 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 Genomma Lab Internacional 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 Genomma Lab i.e., Genomma Lab and Home Depot go up and down completely randomly.

Pair Corralation between Genomma Lab and Home Depot

Assuming the 90 days trading horizon Genomma Lab Internacional is expected to generate 1.15 times more return on investment than Home Depot. However, Genomma Lab is 1.15 times more volatile than The Home Depot. It trades about 0.03 of its potential returns per unit of risk. The Home Depot is currently generating about -0.3 per unit of risk. If you would invest  2,524  in Genomma Lab Internacional on September 26, 2024 and sell it today you would earn a total of  22.00  from holding Genomma Lab Internacional or generate 0.87% return on investment over 90 days.

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

Genomma Lab Internacional  vs.  The Home Depot

Genomma Lab Internacional

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genomma Lab Internacional are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Genomma Lab showed solid returns over the last few months and may actually be approaching a breakup point.

Home Depot

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Home Depot are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Home Depot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Genomma Lab and Home Depot

The main advantage of trading using opposite Genomma Lab and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genomma Lab 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.

The idea behind Genomma Lab Internacional and The 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.