Correlation Between Home Depot and Bankers Investment

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

By analyzing existing cross correlation between Home Depot and Bankers Investment Trust, you can compare the effects of market volatilities on Home Depot and Bankers Investment 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 Bankers Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Bankers Investment.

Diversification Opportunities for Home Depot and Bankers Investment

0.71

Correlation Coefficient

Home Depot  Bankers Investment

Poor diversification

The 3 months correlation between Home and Bankers is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Bankers Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankers Investment Trust 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 Bankers Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankers Investment Trust has no effect on the direction of Home Depot i.e., Home Depot and Bankers Investment go up and down completely randomly.

Pair Corralation between Home Depot and Bankers Investment

If you would invest  11,580  in Bankers Investment Trust on October 11, 2024 and sell it today you would earn a total of  40.00  from holding Bankers Investment Trust or generate 0.35% return on investment over 90 days.

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

Home Depot  vs.  Bankers Investment Trust

Home Depot

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Home Depot is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Bankers Investment Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bankers Investment Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bankers Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Home Depot and Bankers Investment

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

The idea behind Home Depot and Bankers Investment Trust 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.