Correlation Between Malaga Financial and Home Depot

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

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

Diversification Opportunities for Malaga Financial and Home Depot

-0.23

Correlation Coefficient

Malaga Financial  Home Depot

Very good diversification

The 3 months correlation between Malaga and Home is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Malaga Financial and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Malaga Financial 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 Malaga Financial 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 Malaga Financial i.e., Malaga Financial and Home Depot go up and down completely randomly.

Pair Corralation between Malaga Financial and Home Depot

Given the investment horizon of 90 days Malaga Financial is expected to generate 0.47 times more return on investment than Home Depot. However, Malaga Financial is 2.14 times less risky than Home Depot. It trades about 0.05 of its potential returns per unit of risk. Home Depot is currently generating about -0.15 per unit of risk. If you would invest  2,285  in Malaga Financial on March 7, 2024 and sell it today you would earn a total of  44.00  from holding Malaga Financial or generate 1.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Malaga Financial  vs.  Home Depot

Malaga Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Malaga Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Malaga Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Home Depot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Malaga Financial and Home Depot

The main advantage of trading using opposite Malaga Financial and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Malaga Financial 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 Malaga Financial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.