Correlation Between Home Depot and Wise Plc
Can any of the company-specific risk be diversified away by investing in both Home Depot and Wise Plc 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 Wise Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Wise plc, you can compare the effects of market volatilities on Home Depot and Wise Plc 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 Wise Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Wise Plc.
Diversification Opportunities for Home Depot and Wise Plc
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Home and Wise is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Wise plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wise plc 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 Wise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wise plc has no effect on the direction of Home Depot i.e., Home Depot and Wise Plc go up and down completely randomly.
Pair Corralation between Home Depot and Wise Plc
Assuming the 90 days trading horizon Home Depot is expected to generate 3.65 times less return on investment than Wise Plc. But when comparing it to its historical volatility, Home Depot is 14.79 times less risky than Wise Plc. It trades about 0.11 of its potential returns per unit of risk. Wise plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 90,960 in Wise plc on December 2, 2024 and sell it today you would earn a total of 8,290 from holding Wise plc or generate 9.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
Home Depot vs. Wise plc
Performance |
| Timeline |
| Home Depot |
| Wise plc |
Home Depot and Wise Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Wise Plc
The main advantage of trading using opposite Home Depot and Wise Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Wise Plc 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 Wise Plc will offset losses from the drop in Wise Plc's long position.| Home Depot vs. Virgin Wines UK | ||
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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