Correlation Between Home Depot and 26442UAC8

Can any of the company-specific risk be diversified away by investing in both Home Depot and 26442UAC8 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 26442UAC8 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Depot and DUKE ENERGY PROGRESS, you can compare the effects of market volatilities on Home Depot and 26442UAC8 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 26442UAC8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and 26442UAC8.

Diversification Opportunities for Home Depot and 26442UAC8

0.03

Correlation Coefficient

Home Depot  26442UAC8

Significant diversification

The 3 months correlation between Home and 26442UAC8 is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and DUKE ENERGY PROGRESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUKE ENERGY PROGRESS 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 26442UAC8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUKE ENERGY PROGRESS has no effect on the direction of Home Depot i.e., Home Depot and 26442UAC8 go up and down completely randomly.

Pair Corralation between Home Depot and 26442UAC8

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.82 times more return on investment than 26442UAC8. However, Home Depot is 1.21 times less risky than 26442UAC8. It trades about 0.06 of its potential returns per unit of risk. DUKE ENERGY PROGRESS is currently generating about 0.04 per unit of risk. If you would invest  34,681  in Home Depot on October 22, 2024 and sell it today you would earn a total of  6,257  from holding Home Depot or generate 18.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	47.18%
Values	Daily Returns

Home Depot  vs.  DUKE ENERGY PROGRESS

Home Depot

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

DUKE ENERGY PROGRESS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DUKE ENERGY PROGRESS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, 26442UAC8 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Depot and 26442UAC8

The main advantage of trading using opposite Home Depot and 26442UAC8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, 26442UAC8 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 26442UAC8 will offset losses from the drop in 26442UAC8's long position.

The idea behind Home Depot and DUKE ENERGY PROGRESS 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.