Correlation Between Home Depot and IShares ESG

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

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

Diversification Opportunities for Home Depot and IShares ESG

0.71

Correlation Coefficient

Home Depot  IShares ESG

Poor diversification

The 3 months correlation between Home and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and iShares ESG Screened in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Screened 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Screened has no effect on the direction of Home Depot i.e., Home Depot and IShares ESG go up and down completely randomly.

Pair Corralation between Home Depot and IShares ESG

Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the IShares ESG. In addition to that, Home Depot is 1.13 times more volatile than iShares ESG Screened. It trades about -0.45 of its total potential returns per unit of risk. iShares ESG Screened is currently generating about -0.26 per unit of volatility. If you would invest  4,460  in iShares ESG Screened on October 10, 2024 and sell it today you would lose (260.00) from holding iShares ESG Screened or give up 5.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Home Depot  vs.  iShares ESG Screened

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares ESG Screened

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Screened are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking indicators, IShares ESG is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Home Depot and IShares ESG

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

The idea behind Home Depot and iShares ESG Screened 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..