Correlation Between Superior Plus and Home Depot
Can any of the company-specific risk be diversified away by investing in both Superior Plus 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 Superior Plus and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Superior Plus Corp and The Home Depot, you can compare the effects of market volatilities on Superior Plus 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 Superior Plus with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Home Depot.
Diversification Opportunities for Superior Plus and Home Depot
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Superior and Home is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Superior Plus 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 Superior Plus Corp 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 Superior Plus i.e., Superior Plus and Home Depot go up and down completely randomly.
Pair Corralation between Superior Plus and Home Depot
Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Home Depot. In addition to that, Superior Plus is 1.78 times more volatile than The Home Depot. It trades about -0.04 of its total potential returns per unit of risk. The Home Depot is currently generating about 0.14 per unit of volatility. If you would invest 25,554 in The Home Depot on August 25, 2024 and sell it today you would earn a total of 14,521 from holding The Home Depot or generate 56.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.64% |
| Values | Daily Returns |
Superior Plus Corp vs. The Home Depot
Performance |
| Timeline |
| Superior Plus Corp |
| Home Depot |
Superior Plus and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Superior Plus and Home Depot
The main advantage of trading using opposite Superior Plus and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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.| Superior Plus vs. Fast Retailing Co | Superior Plus vs. Auto Trader Group | Superior Plus vs. Monster Beverage Corp | Superior Plus vs. Suntory Beverage Food |
| Home Depot vs. LESLIES INC DL | Home Depot vs. WICKES GROUP PLC | Home Depot vs. Superior Plus Corp | Home Depot vs. NMI Holdings |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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