Correlation Between Home Depot and Healthpeak Properties

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

Diversification Opportunities for Home Depot and Healthpeak Properties

0.45

Correlation Coefficient

Home Depot  Healthpeak Properties

Very weak diversification

The 3 months correlation between Home and Healthpeak is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Healthpeak Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthpeak Properties 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 Healthpeak Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthpeak Properties has no effect on the direction of Home Depot i.e., Home Depot and Healthpeak Properties go up and down completely randomly.

Pair Corralation between Home Depot and Healthpeak Properties

Assuming the 90 days trading horizon The Home Depot is expected to generate 0.42 times more return on investment than Healthpeak Properties. However, The Home Depot is 2.38 times less risky than Healthpeak Properties. It trades about 0.06 of its potential returns per unit of risk. Healthpeak Properties is currently generating about 0.0 per unit of risk. If you would invest  5,620  in The Home Depot on October 11, 2024 and sell it today you would earn a total of  2,844  from holding The Home Depot or generate 50.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	74.95%
Values	Daily Returns

The Home Depot  vs.  Healthpeak Properties

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.

Healthpeak Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthpeak Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Healthpeak Properties 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 Healthpeak Properties

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

The idea behind The Home Depot and Healthpeak Properties 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.