Correlation Between GREENLIGHT CAP and Home Depot

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

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

Diversification Opportunities for GREENLIGHT CAP and Home Depot

0.84

Correlation Coefficient

GREENLIGHT CAP  Home Depot

Very poor diversification

The 3 months correlation between GREENLIGHT and Home is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding GREENLIGHT CAP RE and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and GREENLIGHT CAP 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 GREENLIGHT CAP RE 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 GREENLIGHT CAP i.e., GREENLIGHT CAP and Home Depot go up and down completely randomly.

Pair Corralation between GREENLIGHT CAP and Home Depot

Assuming the 90 days trading horizon GREENLIGHT CAP RE is expected to under-perform the Home Depot. But the stock apears to be less risky and, when comparing its historical volatility, GREENLIGHT CAP RE is 1.09 times less risky than Home Depot. The stock trades about -0.04 of its potential returns per unit of risk. The The Home Depot is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  38,341  in The Home Depot on October 10, 2024 and sell it today you would lose (856.00) from holding The Home Depot or give up 2.23% of portfolio value over 90 days.

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

GREENLIGHT CAP RE  vs.  The Home Depot

GREENLIGHT CAP RE

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GREENLIGHT CAP RE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, GREENLIGHT CAP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Home Depot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Home Depot is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GREENLIGHT CAP and Home Depot

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