Correlation Between Queens Road and HOME DEPOT

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

By analyzing existing cross correlation between Queens Road Capital and HOME DEPOT CDR, you can compare the effects of market volatilities on Queens Road 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 Queens Road with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Queens Road and HOME DEPOT.

Diversification Opportunities for Queens Road and HOME DEPOT

0.11

Correlation Coefficient

Queens Road  HOME DEPOT

Average diversification

The 3 months correlation between Queens and HOME is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Queens Road Capital and HOME DEPOT CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT CDR and Queens Road 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 Queens Road Capital 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 CDR has no effect on the direction of Queens Road i.e., Queens Road and HOME DEPOT go up and down completely randomly.

Pair Corralation between Queens Road and HOME DEPOT

Assuming the 90 days trading horizon Queens Road Capital is expected to generate 1.42 times more return on investment than HOME DEPOT. However, Queens Road is 1.42 times more volatile than HOME DEPOT CDR. It trades about -0.17 of its potential returns per unit of risk. HOME DEPOT CDR is currently generating about -0.3 per unit of risk. If you would invest  76.00  in Queens Road Capital on September 27, 2024 and sell it today you would lose (5.00) from holding Queens Road Capital or give up 6.58% of portfolio value over 90 days.

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

Queens Road Capital  vs.  HOME DEPOT CDR

Queens Road Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Queens Road and HOME DEPOT

The main advantage of trading using opposite Queens Road and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Queens Road 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 Queens Road Capital and HOME DEPOT CDR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.