Correlation Between Home Depot and ProShares UltraPro

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

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

Diversification Opportunities for Home Depot and ProShares UltraPro

0.84

Correlation Coefficient

Home Depot  ProShares UltraPro

Very poor diversification

The 3 months correlation between Home and ProShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ProShares UltraPro QQQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro QQQ 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 ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro QQQ has no effect on the direction of Home Depot i.e., Home Depot and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Home Depot and ProShares UltraPro

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.36 times more return on investment than ProShares UltraPro. However, Home Depot is 2.79 times less risky than ProShares UltraPro. It trades about -0.08 of its potential returns per unit of risk. ProShares UltraPro QQQ is currently generating about -0.1 per unit of risk. If you would invest  39,038  in Home Depot on December 27, 2024 and sell it today you would lose (2,825) from holding Home Depot or give up 7.24% 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.  ProShares UltraPro QQQ

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.

ProShares UltraPro QQQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraPro QQQ has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with Home Depot and ProShares UltraPro

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

The idea behind Home Depot and ProShares UltraPro QQQ 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.