Correlation Between VeriSign and Home Depot
Can any of the company-specific risk be diversified away by investing in both VeriSign 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 VeriSign and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VeriSign and Home Depot, you can compare the effects of market volatilities on VeriSign 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 VeriSign with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of VeriSign and Home Depot.
Diversification Opportunities for VeriSign and Home Depot
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VeriSign and Home is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and VeriSign 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 VeriSign 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 VeriSign i.e., VeriSign and Home Depot go up and down completely randomly.
Pair Corralation between VeriSign and Home Depot
Assuming the 90 days trading horizon VeriSign is expected to generate 6.73 times more return on investment than Home Depot. However, VeriSign is 6.73 times more volatile than Home Depot. It trades about 0.21 of its potential returns per unit of risk. Home Depot is currently generating about 0.22 per unit of risk. If you would invest 18,423 in VeriSign on September 14, 2024 and sell it today you would earn a total of 1,539 from holding VeriSign or generate 8.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VeriSign vs. Home Depot
Performance |
| Timeline |
| VeriSign |
| Home Depot |
VeriSign and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VeriSign and Home Depot
The main advantage of trading using opposite VeriSign and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VeriSign 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.| VeriSign vs. Prosiebensat 1 Media | VeriSign vs. Finnair Oyj | VeriSign vs. G5 Entertainment AB | VeriSign vs. Atresmedia |
| Home Depot vs. Rightmove PLC | Home Depot vs. Bioventix | Home Depot vs. VeriSign | Home Depot vs. Games Workshop Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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