Correlation Between Home Depot and Pacer CFRA

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

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

Diversification Opportunities for Home Depot and Pacer CFRA

0.93

Correlation Coefficient

Home Depot  Pacer CFRA

Almost no diversification

The 3 months correlation between Home and Pacer is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Pacer CFRA Stovall Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer CFRA Stovall 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 Pacer CFRA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer CFRA Stovall has no effect on the direction of Home Depot i.e., Home Depot and Pacer CFRA go up and down completely randomly.

Pair Corralation between Home Depot and Pacer CFRA

Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Pacer CFRA. In addition to that, Home Depot is 1.43 times more volatile than Pacer CFRA Stovall Equal. It trades about -0.15 of its total potential returns per unit of risk. Pacer CFRA Stovall Equal is currently generating about -0.12 per unit of volatility. If you would invest  3,783  in Pacer CFRA Stovall Equal on December 17, 2024 and sell it today you would lose (284.00) from holding Pacer CFRA Stovall Equal or give up 7.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Home Depot  vs.  Pacer CFRA Stovall Equal

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 unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pacer CFRA Stovall

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer CFRA Stovall Equal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Home Depot and Pacer CFRA

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

The idea behind Home Depot and Pacer CFRA Stovall Equal 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.