# Correlation Between Home Depot and SCOR PK

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

## Diversification Opportunities for Home Depot and SCOR PK

 -0.6 Correlation Coefficient

### Excellent diversification

The 3 months correlation between Home and SCOR is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and SCOR PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOR PK 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 SCOR PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOR PK has no effect on the direction of Home Depot i.e., Home Depot and SCOR PK go up and down completely randomly.

## Pair Corralation between Home Depot and SCOR PK

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.29 times more return on investment than SCOR PK. However, Home Depot is 3.42 times less risky than SCOR PK. It trades about -0.08 of its potential returns per unit of risk. SCOR PK is currently generating about -0.32 per unit of risk. If you would invest  35,977  in Home Depot on May 13, 2024 and sell it today you would lose (1,113) from holding Home Depot or give up 3.09% of portfolio value over 90 days.
 Time Period 3 Months [change] Direction Moves Against Strength Weak Accuracy 100.0% Values Daily Returns

## Home Depot  vs.  SCOR PK

 Performance
 Timeline
 Home Depot Correlation Profile

### 3 of 100

 Weak Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
 Performance Backtest Predict
 SCOR PK Correlation Profile

### 0 of 100

 Weak Strong
Very Weak
Over the last 90 days SCOR PK 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 basic indicators remain fairly strong which may send shares a bit higher in September 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
 Performance Backtest Predict

## Home Depot and SCOR PK Volatility Contrast

 Predicted Return Density
 Returns

## Pair Trading with Home Depot and SCOR PK

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