Correlation Between HOME DEPOT and Medical Facilities

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

By analyzing existing cross correlation between HOME DEPOT CDR and Medical Facilities, you can compare the effects of market volatilities on HOME DEPOT and Medical Facilities 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 Medical Facilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and Medical Facilities.

Diversification Opportunities for HOME DEPOT and Medical Facilities

0.39

Correlation Coefficient

HOME DEPOT  Medical Facilities

Weak diversification

The 3 months correlation between HOME and Medical is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities 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 CDR are associated (or correlated) with Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Medical Facilities go up and down completely randomly.

Pair Corralation between HOME DEPOT and Medical Facilities

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 1.03 times more return on investment than Medical Facilities. However, HOME DEPOT is 1.03 times more volatile than Medical Facilities. It trades about 0.06 of its potential returns per unit of risk. Medical Facilities is currently generating about 0.05 per unit of risk. If you would invest  2,193  in HOME DEPOT CDR on April 20, 2025 and sell it today you would earn a total of  89.00  from holding HOME DEPOT CDR or generate 4.06% return on investment over 90 days.

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

HOME DEPOT CDR  vs.  Medical Facilities

HOME DEPOT CDR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HOME DEPOT CDR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Medical Facilities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Medical Facilities is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with HOME DEPOT and Medical Facilities

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

The idea behind HOME DEPOT CDR and Medical Facilities 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.