Correlation Between Home Depot and 532457BZ0

Can any of the company-specific risk be diversified away by investing in both Home Depot and 532457BZ0 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 532457BZ0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Depot and ELI LILLY AND, you can compare the effects of market volatilities on Home Depot and 532457BZ0 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 532457BZ0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and 532457BZ0.

Diversification Opportunities for Home Depot and 532457BZ0

0.12

Correlation Coefficient

Home Depot  532457BZ0

Average diversification

The 3 months correlation between Home and 532457BZ0 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ELI LILLY AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELI LILLY AND 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 532457BZ0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELI LILLY AND has no effect on the direction of Home Depot i.e., Home Depot and 532457BZ0 go up and down completely randomly.

Pair Corralation between Home Depot and 532457BZ0

Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the 532457BZ0. But the stock apears to be less risky and, when comparing its historical volatility, Home Depot is 2.44 times less risky than 532457BZ0. The stock trades about -0.42 of its potential returns per unit of risk. The ELI LILLY AND is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,863  in ELI LILLY AND on October 7, 2024 and sell it today you would earn a total of  80.00  from holding ELI LILLY AND or generate 1.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Home Depot  vs.  ELI LILLY AND

Home Depot

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ELI LILLY AND

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELI LILLY AND are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 532457BZ0 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Home Depot and 532457BZ0

The main advantage of trading using opposite Home Depot and 532457BZ0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, 532457BZ0 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 532457BZ0 will offset losses from the drop in 532457BZ0's long position.

The idea behind Home Depot and ELI LILLY AND 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.