Correlation Between Home Depot and Nuveen Core

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

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

Diversification Opportunities for Home Depot and Nuveen Core

0.88

Correlation Coefficient

Home Depot  Nuveen Core

Very poor diversification

The 3 months correlation between Home and Nuveen is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Nuveen Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Core Equity 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 Nuveen Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Core Equity has no effect on the direction of Home Depot i.e., Home Depot and Nuveen Core go up and down completely randomly.

Pair Corralation between Home Depot and Nuveen Core

Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Nuveen Core. In addition to that, Home Depot is 1.61 times more volatile than Nuveen Core Equity. It trades about -0.08 of its total potential returns per unit of risk. Nuveen Core Equity is currently generating about -0.08 per unit of volatility. If you would invest  1,534  in Nuveen Core Equity on December 27, 2024 and sell it today you would lose (72.00) from holding Nuveen Core Equity or give up 4.69% of portfolio value over 90 days.

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

Home Depot  vs.  Nuveen Core Equity

Home Depot

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Nuveen Core Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Core Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound fundamental indicators, Nuveen Core is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Home Depot and Nuveen Core

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

The idea behind Home Depot and Nuveen Core Equity 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.