Correlation Between Tinybeans Group and Home Depot

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

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

Diversification Opportunities for Tinybeans Group and Home Depot

0.09

Correlation Coefficient

Tinybeans Group  Home Depot

Significant diversification

The 3 months correlation between Tinybeans and Home is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Tinybeans Group Limited and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Tinybeans Group 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 Tinybeans Group Limited 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 Tinybeans Group i.e., Tinybeans Group and Home Depot go up and down completely randomly.

Pair Corralation between Tinybeans Group and Home Depot

Assuming the 90 days horizon Tinybeans Group Limited is expected to under-perform the Home Depot. In addition to that, Tinybeans Group is 2.96 times more volatile than Home Depot. It trades about -0.22 of its total potential returns per unit of risk. Home Depot is currently generating about 0.13 per unit of volatility. If you would invest  40,097  in Home Depot on September 13, 2024 and sell it today you would earn a total of  1,403  from holding Home Depot or generate 3.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Tinybeans Group Limited  vs.  Home Depot

Tinybeans Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tinybeans Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tinybeans Group reported solid returns over the last few months and may actually be approaching a breakup point.

Home Depot

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 10 (%) 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.

Pair Trading with Tinybeans Group and Home Depot

The main advantage of trading using opposite Tinybeans Group and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tinybeans Group 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 Tinybeans Group Limited and 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.