Correlation Between Home Depot and SoftBank Group
Can any of the company-specific risk be diversified away by investing in both Home Depot and SoftBank Group 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 SoftBank Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and SoftBank Group Corp, you can compare the effects of market volatilities on Home Depot and SoftBank Group 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 SoftBank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and SoftBank Group.
Diversification Opportunities for Home Depot and SoftBank Group
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and SoftBank is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and SoftBank Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftBank Group Corp 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 SoftBank Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftBank Group Corp has no effect on the direction of Home Depot i.e., Home Depot and SoftBank Group go up and down completely randomly.
Pair Corralation between Home Depot and SoftBank Group
Assuming the 90 days trading horizon Home Depot is expected to generate 7.3 times less return on investment than SoftBank Group. But when comparing it to its historical volatility, Home Depot is 19.28 times less risky than SoftBank Group. It trades about 0.12 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 841,213 in SoftBank Group Corp on September 3, 2024 and sell it today you would earn a total of 36,787 from holding SoftBank Group Corp or generate 4.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 67.19% |
| Values | Daily Returns |
Home Depot vs. SoftBank Group Corp
Performance |
| Timeline |
| Home Depot |
| SoftBank Group Corp |
Home Depot and SoftBank Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and SoftBank Group
The main advantage of trading using opposite Home Depot and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, SoftBank Group 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 SoftBank Group will offset losses from the drop in SoftBank Group's long position.| Home Depot vs. Rockfire Resources plc | Home Depot vs. Tlou Energy | Home Depot vs. Falcon Oil Gas | Home Depot vs. Helium One Global |
| SoftBank Group vs. Home Depot | SoftBank Group vs. Beazer Homes USA | SoftBank Group vs. Ecclesiastical Insurance Office | SoftBank Group vs. Systemair AB |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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