Correlation Between Humana and Home Depot
Can any of the company-specific risk be diversified away by investing in both Humana 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 Humana and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Humana Inc and Home Depot, you can compare the effects of market volatilities on Humana 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 Humana with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Humana and Home Depot.
Diversification Opportunities for Humana and Home Depot
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Humana and Home is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Humana Inc and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Humana 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 Humana Inc 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 Humana i.e., Humana and Home Depot go up and down completely randomly.
Pair Corralation between Humana and Home Depot
Assuming the 90 days trading horizon Humana Inc is expected to under-perform the Home Depot. In addition to that, Humana is 9.9 times more volatile than Home Depot. It trades about -0.04 of its total potential returns per unit of risk. Home Depot is currently generating about 0.09 per unit of volatility. If you would invest 16,193 in Home Depot on August 30, 2024 and sell it today you would earn a total of 1,664 from holding Home Depot or generate 10.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Humana Inc vs. Home Depot
Performance |
| Timeline |
| Humana Inc |
| Home Depot |
Humana and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Humana and Home Depot
The main advantage of trading using opposite Humana and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Humana 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.| Humana vs. Lendinvest PLC | Humana vs. Neometals | Humana vs. Albion Technology General | Humana vs. Jupiter Fund Management |
| Home Depot vs. Ondine Biomedical | Home Depot vs. Europa Metals | Home Depot vs. Lendinvest PLC | Home Depot vs. Neometals |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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