Correlation Between Bristol Myer and Home Depot

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

Diversification Opportunities for Bristol Myer and Home Depot

-0.58
  Correlation Coefficient
Bristol Myer Squi
Home Depot

Excellent diversification

The 1 month correlation between Bristol and Home Depot is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bristol Myer Squi and Home Depot in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Bristol Myer 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 Bristol Myer Squi 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 Bristol Myer i.e., Bristol Myer and Home Depot go up and down completely randomly.

Pair Corralation between Bristol Myer and Home Depot

Assuming the 90 days horizon Bristol Myer Squi is expected to generate 8.08 times more return on investment than Home Depot. However, Bristol Myer is 8.08 times more volatile than Home Depot. It trades about 0.1 of its potential returns per unit of risk. Home Depot is currently generating about -0.27 per unit of risk. If you would invest  130,500  in Bristol Myer Squi on October 31, 2021 and sell it today you would earn a total of  11,422  from holding Bristol Myer Squi or generate 8.75% return on investment over 90 days.
Time Period1 Month [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Bristol Myer Squi  vs.  Home Depot

 Performance (%) 
      Timeline 
Bristol Myer Squi 
Bristol Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myer Squi are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Bristol Myer displayed solid returns over the last few months and may actually be approaching a breakup point.

Bristol Price Channel

Home Depot 
Home Depot Performance
0 of 100
Over the last 90 days Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Home Depot Price Channel

Bristol Myer and Home Depot Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Bristol Myer and Home Depot

The main advantage of trading using opposite Bristol Myer and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bristol Myer 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 Bristol Myer Squi 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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.

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