Correlation Between Home Depot and Clover Health

Can any of the company-specific risk be diversified away by investing in both Home Depot and Clover Health 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 Clover Health 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 Clover Health Investments,, you can compare the effects of market volatilities on Home Depot and Clover Health 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 Clover Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Clover Health.

Diversification Opportunities for Home Depot and Clover Health

-0.3

Correlation Coefficient

Home Depot  Clover Health

Very good diversification

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

Pair Corralation between Home Depot and Clover Health

Assuming the 90 days trading horizon The Home Depot is expected to under-perform the Clover Health. But the stock apears to be less risky and, when comparing its historical volatility, The Home Depot is 1.99 times less risky than Clover Health. The stock trades about -0.28 of its potential returns per unit of risk. The Clover Health Investments, is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,934  in Clover Health Investments, on October 11, 2024 and sell it today you would earn a total of  220.00  from holding Clover Health Investments, or generate 11.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

The Home Depot  vs.  Clover Health Investments,

Home Depot

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Home Depot are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Home Depot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Clover Health Invest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clover Health Investments, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Clover Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Home Depot and Clover Health

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

The idea behind The Home Depot and Clover Health Investments, 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.