Correlation Between Home Depot and Brookfield
Can any of the company-specific risk be diversified away by investing in both Home Depot and Brookfield 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 Brookfield 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 Brookfield, you can compare the effects of market volatilities on Home Depot and Brookfield 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 Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Brookfield.
Diversification Opportunities for Home Depot and Brookfield
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Brookfield is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield 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 Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of Home Depot i.e., Home Depot and Brookfield go up and down completely randomly.
Pair Corralation between Home Depot and Brookfield
Assuming the 90 days trading horizon The Home Depot is expected to under-perform the Brookfield. In addition to that, Home Depot is 1.2 times more volatile than Brookfield. It trades about -0.25 of its total potential returns per unit of risk. Brookfield is currently generating about -0.05 per unit of volatility. If you would invest 8,991 in Brookfield on October 8, 2024 and sell it today you would lose (134.00) from holding Brookfield or give up 1.49% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
The Home Depot vs. Brookfield
Performance |
Timeline |
Home Depot |
Brookfield |
Home Depot and Brookfield Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and Brookfield
The main advantage of trading using opposite Home Depot and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Brookfield 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 Brookfield will offset losses from the drop in Brookfield's long position.Home Depot vs. CM Hospitalar SA | Home Depot vs. UnitedHealth Group Incorporated | Home Depot vs. Vulcan Materials | Home Depot vs. Metalrgica Riosulense SA |
Brookfield vs. Extra Space Storage | Brookfield vs. CVS Health | Brookfield vs. United States Steel | Brookfield vs. salesforce inc |
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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