Correlation Between Home Depot and 548661EL7

Can any of the company-specific risk be diversified away by investing in both Home Depot and 548661EL7 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 548661EL7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Depot and LOW 5 15 APR 33, you can compare the effects of market volatilities on Home Depot and 548661EL7 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 548661EL7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and 548661EL7.

Diversification Opportunities for Home Depot and 548661EL7

-0.08

Correlation Coefficient

Home Depot  548661EL7

Good diversification

The 3 months correlation between Home and 548661EL7 is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and LOW 5 15 APR 33 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 548661EL7 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 548661EL7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 548661EL7 has no effect on the direction of Home Depot i.e., Home Depot and 548661EL7 go up and down completely randomly.

Pair Corralation between Home Depot and 548661EL7

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.42 times more return on investment than 548661EL7. However, Home Depot is 1.42 times more volatile than LOW 5 15 APR 33. It trades about -0.08 of its potential returns per unit of risk. LOW 5 15 APR 33 is currently generating about -0.12 per unit of risk. If you would invest  38,697  in Home Depot on December 30, 2024 and sell it today you would lose (2,882) from holding Home Depot or give up 7.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Home Depot  vs.  LOW 5 15 APR 33

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.

548661EL7

Risk-Adjusted Performance

Very Weak

Over the last 90 days LOW 5 15 APR 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for LOW 5 15 APR 33 investors.

Pair Trading with Home Depot and 548661EL7

The main advantage of trading using opposite Home Depot and 548661EL7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, 548661EL7 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 548661EL7 will offset losses from the drop in 548661EL7's long position.

The idea behind Home Depot and LOW 5 15 APR 33 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.