Correlation Between HOME DEPOT and Baytex Energy

Can any of the company-specific risk be diversified away by investing in both HOME DEPOT and Baytex Energy 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 Baytex Energy 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 Baytex Energy Corp, you can compare the effects of market volatilities on HOME DEPOT and Baytex Energy 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 Baytex Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and Baytex Energy.

Diversification Opportunities for HOME DEPOT and Baytex Energy

-0.49

Correlation Coefficient

HOME DEPOT  Baytex Energy

Very good diversification

The 3 months correlation between HOME and Baytex is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Baytex Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baytex Energy Corp 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 Baytex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baytex Energy Corp has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Baytex Energy go up and down completely randomly.

Pair Corralation between HOME DEPOT and Baytex Energy

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to under-perform the Baytex Energy. But the stock apears to be less risky and, when comparing its historical volatility, HOME DEPOT CDR is 1.8 times less risky than Baytex Energy. The stock trades about -0.16 of its potential returns per unit of risk. The Baytex Energy Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  431.00  in Baytex Energy Corp on February 29, 2024 and sell it today you would earn a total of  48.00  from holding Baytex Energy Corp or generate 11.14% return on investment over 90 days.

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

HOME DEPOT CDR  vs.  Baytex Energy Corp

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Baytex Energy Corp

Risk-Adjusted Performance

6 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baytex Energy Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Baytex Energy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with HOME DEPOT and Baytex Energy

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

The idea behind HOME DEPOT CDR and Baytex Energy Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.