Correlation Between Albireo Pharma and Home Depot

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Can any of the company-specific risk be diversified away by investing in both Albireo Pharma 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 Albireo Pharma and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Albireo Pharma and Home Depot, you can compare the effects of market volatilities on Albireo Pharma 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 Albireo Pharma with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albireo Pharma and Home Depot.

Diversification Opportunities for Albireo Pharma and Home Depot

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Albireo and Home is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Albireo Pharma and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Albireo Pharma 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 Albireo Pharma 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 Albireo Pharma i.e., Albireo Pharma and Home Depot go up and down completely randomly.

Pair Corralation between Albireo Pharma and Home Depot

Given the investment horizon of 90 days Albireo Pharma is expected to generate 5.37 times more return on investment than Home Depot. However, Albireo Pharma is 5.37 times more volatile than Home Depot. It trades about 0.08 of its potential returns per unit of risk. Home Depot is currently generating about 0.05 per unit of risk. If you would invest  2,119  in Albireo Pharma on December 29, 2023 and sell it today you would earn a total of  2,296  from holding Albireo Pharma or generate 108.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy40.97%
ValuesDaily Returns

Albireo Pharma  vs.  Home Depot

 Performance 
       Timeline  
Albireo Pharma 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Albireo Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Albireo Pharma is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Home Depot 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Albireo Pharma and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Albireo Pharma and Home Depot

The main advantage of trading using opposite Albireo Pharma and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albireo Pharma 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 Albireo Pharma 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.
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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