Correlation Between Home Depot and Schwab Strategic

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

Diversification Opportunities for Home Depot and Schwab Strategic

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Home and Schwab is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Schwab Strategic Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Strategic 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 Schwab Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Strategic Trust has no effect on the direction of Home Depot i.e., Home Depot and Schwab Strategic go up and down completely randomly.

Pair Corralation between Home Depot and Schwab Strategic

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.09 times less return on investment than Schwab Strategic. In addition to that, Home Depot is 1.17 times more volatile than Schwab Strategic Trust. It trades about 0.06 of its total potential returns per unit of risk. Schwab Strategic Trust is currently generating about 0.07 per unit of volatility. If you would invest  1,962  in Schwab Strategic Trust on September 14, 2024 and sell it today you would earn a total of  862.00  from holding Schwab Strategic Trust or generate 43.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Home Depot  vs.  Schwab Strategic Trust

 Performance 
       Timeline  
Home Depot 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Schwab Strategic Trust 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Strategic Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Schwab Strategic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Home Depot and Schwab Strategic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and Schwab Strategic

The main advantage of trading using opposite Home Depot and Schwab Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Schwab Strategic 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 Schwab Strategic will offset losses from the drop in Schwab Strategic's long position.
The idea behind Home Depot and Schwab Strategic 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.
Check out your portfolio center.
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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