Correlation Between Home Depot and Nationwide Building
Can any of the company-specific risk be diversified away by investing in both Home Depot and Nationwide Building 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 Nationwide Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Nationwide Building Society, you can compare the effects of market volatilities on Home Depot and Nationwide Building 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 Nationwide Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Nationwide Building.
Diversification Opportunities for Home Depot and Nationwide Building
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and Nationwide is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Nationwide Building Society in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Building 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 Nationwide Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Building has no effect on the direction of Home Depot i.e., Home Depot and Nationwide Building go up and down completely randomly.
Pair Corralation between Home Depot and Nationwide Building
Assuming the 90 days trading horizon Home Depot is expected to generate 0.9 times more return on investment than Nationwide Building. However, Home Depot is 1.11 times less risky than Nationwide Building. It trades about 0.15 of its potential returns per unit of risk. Nationwide Building Society is currently generating about 0.0 per unit of risk. If you would invest 17,632 in Home Depot on September 5, 2024 and sell it today you would earn a total of 225.00 from holding Home Depot or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Home Depot vs. Nationwide Building Society
Performance |
| Timeline |
| Home Depot |
| Nationwide Building |
Home Depot and Nationwide Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Nationwide Building
The main advantage of trading using opposite Home Depot and Nationwide Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Nationwide Building 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 Nationwide Building will offset losses from the drop in Nationwide Building's long position.| Home Depot vs. Toyota Motor Corp | Home Depot vs. SoftBank Group Corp | Home Depot vs. OTP Bank Nyrt | Home Depot vs. Las Vegas Sands |
| Nationwide Building vs. Home Depot | Nationwide Building vs. Weiss Korea Opportunity | Nationwide Building vs. River and Mercantile | Nationwide Building vs. Chrysalis Investments |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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