Correlation Between 30040WAN8 and Home Depot

Can any of the company-specific risk be diversified away by investing in both 30040WAN8 and Home Depot 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 30040WAN8 and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ES 14 15 AUG 26 and Home Depot, you can compare the effects of market volatilities on 30040WAN8 and Home Depot 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 30040WAN8 with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of 30040WAN8 and Home Depot.

Diversification Opportunities for 30040WAN8 and Home Depot

0.5

Correlation Coefficient

30040WAN8  Home Depot

Very weak diversification

The 3 months correlation between 30040WAN8 and Home is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ES 14 15 AUG 26 and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and 30040WAN8 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 ES 14 15 AUG 26 are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of 30040WAN8 i.e., 30040WAN8 and Home Depot go up and down completely randomly.

Pair Corralation between 30040WAN8 and Home Depot

Assuming the 90 days trading horizon ES 14 15 AUG 26 is expected to under-perform the Home Depot. But the bond apears to be less risky and, when comparing its historical volatility, ES 14 15 AUG 26 is 1.87 times less risky than Home Depot. The bond trades about -0.14 of its potential returns per unit of risk. The Home Depot is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  36,283  in Home Depot on September 3, 2024 and sell it today you would earn a total of  6,630  from holding Home Depot or generate 18.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	56.25%
Values	Daily Returns

ES 14 15 AUG 26  vs.  Home Depot

30040WAN8

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ES 14 15 AUG 26 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 30040WAN8 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Home Depot

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 30040WAN8 and Home Depot

The main advantage of trading using opposite 30040WAN8 and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 30040WAN8 position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.

The idea behind ES 14 15 AUG 26 and Home Depot 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.