Correlation Between Home Depot and Freddie Mac
Can any of the company-specific risk be diversified away by investing in both Home Depot and Freddie Mac 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 Freddie Mac into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Freddie Mac, you can compare the effects of market volatilities on Home Depot and Freddie Mac 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 Freddie Mac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Freddie Mac.
Diversification Opportunities for Home Depot and Freddie Mac
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Home and Freddie is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Freddie Mac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freddie Mac 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 Home Depot are associated (or correlated) with Freddie Mac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freddie Mac has no effect on the direction of Home Depot i.e., Home Depot and Freddie Mac go up and down completely randomly.
Pair Corralation between Home Depot and Freddie Mac
If you would invest 134.00 in Freddie Mac on August 27, 2024 and sell it today you would earn a total of 207.00 from holding Freddie Mac or generate 154.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Freddie Mac
Performance |
| Timeline |
| Home Depot |
| Freddie Mac |
Home Depot and Freddie Mac Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Freddie Mac
The main advantage of trading using opposite Home Depot and Freddie Mac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Freddie Mac 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 Freddie Mac will offset losses from the drop in Freddie Mac's long position.| Home Depot vs. Walmart | Home Depot vs. Volkswagen AG | Home Depot vs. Volkswagen AG Non Vtg | Home Depot vs. Compass Group PLC |
| Freddie Mac vs. Young Cos Brewery | Freddie Mac vs. Home Depot | Freddie Mac vs. Tatton Asset Management | Freddie Mac vs. Pets at Home |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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