Correlation Between Home Depot and MORGAN

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

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

Diversification Opportunities for Home Depot and MORGAN

-0.3

Correlation Coefficient

Home Depot  MORGAN

Very good diversification

The 3 months correlation between Home and MORGAN is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and MORGAN STANLEY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MORGAN STANLEY 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 MORGAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MORGAN STANLEY has no effect on the direction of Home Depot i.e., Home Depot and MORGAN go up and down completely randomly.

Pair Corralation between Home Depot and MORGAN

Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the MORGAN. In addition to that, Home Depot is 15.55 times more volatile than MORGAN STANLEY. It trades about -0.11 of its total potential returns per unit of risk. MORGAN STANLEY is currently generating about 0.15 per unit of volatility. If you would invest  9,579  in MORGAN STANLEY on December 4, 2024 and sell it today you would earn a total of  74.00  from holding MORGAN STANLEY or generate 0.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Home Depot  vs.  MORGAN STANLEY

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 unsteady 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.

MORGAN STANLEY

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MORGAN STANLEY are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MORGAN 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 MORGAN

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

The idea behind Home Depot and MORGAN STANLEY 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .