Correlation Between Home Depot and STF Tactical
Can any of the company-specific risk be diversified away by investing in both Home Depot and STF Tactical 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 STF Tactical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and STF Tactical Growth, you can compare the effects of market volatilities on Home Depot and STF Tactical 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 STF Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and STF Tactical.
Diversification Opportunities for Home Depot and STF Tactical
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and STF is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and STF Tactical Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STF Tactical Growth 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 STF Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STF Tactical Growth has no effect on the direction of Home Depot i.e., Home Depot and STF Tactical go up and down completely randomly.
Pair Corralation between Home Depot and STF Tactical
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.27 times less return on investment than STF Tactical. In addition to that, Home Depot is 1.42 times more volatile than STF Tactical Growth. It trades about 0.13 of its total potential returns per unit of risk. STF Tactical Growth is currently generating about 0.23 per unit of volatility. If you would invest 2,204 in STF Tactical Growth on September 15, 2024 and sell it today you would earn a total of 289.00 from holding STF Tactical Growth or generate 13.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.46% |
Values | Daily Returns |
Home Depot vs. STF Tactical Growth
Performance |
Timeline |
Home Depot |
STF Tactical Growth |
Home Depot and STF Tactical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and STF Tactical
The main advantage of trading using opposite Home Depot and STF Tactical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, STF Tactical 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 STF Tactical will offset losses from the drop in STF Tactical's long position.Home Depot vs. Aquagold International | Home Depot vs. Thrivent High Yield | Home Depot vs. Morningstar Unconstrained Allocation | Home Depot vs. Via Renewables |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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