Correlation Between Home Depot and Plastic Omnium
Can any of the company-specific risk be diversified away by investing in both Home Depot and Plastic Omnium 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 Plastic Omnium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Home Depot and Plastic Omnium, you can compare the effects of market volatilities on Home Depot and Plastic Omnium 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 Plastic Omnium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Plastic Omnium.
Diversification Opportunities for Home Depot and Plastic Omnium
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Home and Plastic is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic Omnium 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 The Home Depot are associated (or correlated) with Plastic Omnium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastic Omnium has no effect on the direction of Home Depot i.e., Home Depot and Plastic Omnium go up and down completely randomly.
Pair Corralation between Home Depot and Plastic Omnium
Assuming the 90 days trading horizon The Home Depot is expected to under-perform the Plastic Omnium. But the stock apears to be less risky and, when comparing its historical volatility, The Home Depot is 2.0 times less risky than Plastic Omnium. The stock trades about -0.15 of its potential returns per unit of risk. The Plastic Omnium is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 997.00 in Plastic Omnium on December 24, 2024 and sell it today you would lose (3.00) from holding Plastic Omnium or give up 0.3% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
The Home Depot vs. Plastic Omnium
Performance |
Timeline |
Home Depot |
Plastic Omnium |
Home Depot and Plastic Omnium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and Plastic Omnium
The main advantage of trading using opposite Home Depot and Plastic Omnium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Plastic Omnium 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 Plastic Omnium will offset losses from the drop in Plastic Omnium's long position.Home Depot vs. Western Copper and | Home Depot vs. FIREWEED METALS P | Home Depot vs. Keck Seng Investments | Home Depot vs. GOLDQUEST MINING |
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Check out your portfolio center.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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