Correlation Between Home Depot and Betterware

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

By analyzing existing cross correlation between Home Depot and Betterware de Mxico,, you can compare the effects of market volatilities on Home Depot and Betterware 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 Betterware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Betterware.

Diversification Opportunities for Home Depot and Betterware

-0.48

Correlation Coefficient

Home Depot  Betterware

Very good diversification

The 3 months correlation between Home and Betterware is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Betterware de Mxico, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betterware de Mxico, 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 are associated (or correlated) with Betterware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betterware de Mxico, has no effect on the direction of Home Depot i.e., Home Depot and Betterware go up and down completely randomly.

Pair Corralation between Home Depot and Betterware

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.74 times more return on investment than Betterware. However, Home Depot is 1.35 times less risky than Betterware. It trades about 0.11 of its potential returns per unit of risk. Betterware de Mxico, is currently generating about -0.14 per unit of risk. If you would invest  40,604  in Home Depot on September 16, 2024 and sell it today you would earn a total of  1,094  from holding Home Depot or generate 2.69% 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  vs.  Betterware de Mxico,

Home Depot

Risk-Adjusted Performance

10 of 100

OK

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.

Betterware de Mxico,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Betterware de Mxico, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Home Depot and Betterware

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

The idea behind Home Depot and Betterware de Mxico, 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.