Correlation Between Columbia Large and Home Depot

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

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

Diversification Opportunities for Columbia Large and Home Depot

-0.39

Correlation Coefficient

Columbia Large  Home Depot

Very good diversification

The 3 months correlation between Columbia and Home is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Large Cap and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Columbia Large 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 Columbia Large Cap 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 Columbia Large i.e., Columbia Large and Home Depot go up and down completely randomly.

Pair Corralation between Columbia Large and Home Depot

If you would invest  5,715  in Columbia Large Cap on January 25, 2024 and sell it today you would earn a total of  0.00  from holding Columbia Large Cap or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Columbia Large Cap  vs.  Home Depot

Columbia Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Columbia Large is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Columbia Large and Home Depot

The main advantage of trading using opposite Columbia Large and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Large 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 Columbia Large Cap 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.