Correlation Between Boqii Holding and Home Depot

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

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

Diversification Opportunities for Boqii Holding and Home Depot

0.04

Correlation Coefficient

Boqii Holding  Home Depot

Significant diversification

The 3 months correlation between Boqii and Home is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Boqii Holding Limited and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Boqii Holding 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 Boqii Holding Limited 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 Boqii Holding i.e., Boqii Holding and Home Depot go up and down completely randomly.

Pair Corralation between Boqii Holding and Home Depot

Allowing for the 90-day total investment horizon Boqii Holding Limited is expected to under-perform the Home Depot. In addition to that, Boqii Holding is 6.38 times more volatile than Home Depot. It trades about -0.01 of its total potential returns per unit of risk. Home Depot is currently generating about 0.01 per unit of volatility. If you would invest  38,991  in Home Depot on September 22, 2024 and sell it today you would earn a total of  269.00  from holding Home Depot or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Boqii Holding Limited  vs.  Home Depot

Boqii Holding Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boqii Holding Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Boqii Holding is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Home Depot

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 1 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Boqii Holding and Home Depot

The main advantage of trading using opposite Boqii Holding and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boqii Holding 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 Boqii Holding Limited 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.