Correlation Between Home Depot and THC Therapeutics
Can any of the company-specific risk be diversified away by investing in both Home Depot and THC Therapeutics 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 THC Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and THC Therapeutics, you can compare the effects of market volatilities on Home Depot and THC Therapeutics 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 THC Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and THC Therapeutics.
Diversification Opportunities for Home Depot and THC Therapeutics
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and THC is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and THC Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THC Therapeutics 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 THC Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THC Therapeutics has no effect on the direction of Home Depot i.e., Home Depot and THC Therapeutics go up and down completely randomly.
Pair Corralation between Home Depot and THC Therapeutics
Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the THC Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Home Depot is 21.57 times less risky than THC Therapeutics. The stock trades about -0.08 of its potential returns per unit of risk. The THC Therapeutics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.06 in THC Therapeutics on December 1, 2024 and sell it today you would lose (0.03) from holding THC Therapeutics or give up 50.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.24% |
Values | Daily Returns |
Home Depot vs. THC Therapeutics
Performance |
Timeline |
Home Depot |
THC Therapeutics |
Home Depot and THC Therapeutics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and THC Therapeutics
The main advantage of trading using opposite Home Depot and THC Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, THC Therapeutics 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 THC Therapeutics will offset losses from the drop in THC Therapeutics' long position.Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
THC Therapeutics vs. Link Reservations | THC Therapeutics vs. MERCK Kommanditgesellschaft auf | THC Therapeutics vs. Greater Cannabis | THC Therapeutics vs. Global Hemp Group |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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