Correlation Between Brookfield and HOME DEPOT
Can any of the company-specific risk be diversified away by investing in both Brookfield 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 Brookfield and HOME DEPOT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield and HOME DEPOT CDR, you can compare the effects of market volatilities on Brookfield 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 Brookfield with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield and HOME DEPOT.
Diversification Opportunities for Brookfield and HOME DEPOT
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Brookfield and HOME is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and HOME DEPOT CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT CDR and Brookfield 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 Brookfield 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 CDR has no effect on the direction of Brookfield i.e., Brookfield and HOME DEPOT go up and down completely randomly.
Pair Corralation between Brookfield and HOME DEPOT
Assuming the 90 days trading horizon Brookfield is expected to under-perform the HOME DEPOT. But the preferred stock apears to be less risky and, when comparing its historical volatility, Brookfield is 2.63 times less risky than HOME DEPOT. The preferred stock trades about -0.01 of its potential returns per unit of risk. The HOME DEPOT CDR is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,503 in HOME DEPOT CDR on November 2, 2024 and sell it today you would earn a total of 161.00 from holding HOME DEPOT CDR or generate 6.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield vs. HOME DEPOT CDR
Performance |
| Timeline |
| Brookfield |
| HOME DEPOT CDR |
Brookfield and HOME DEPOT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield and HOME DEPOT
The main advantage of trading using opposite Brookfield and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield 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.| Brookfield vs. Computer Modelling Group | Brookfield vs. Questor Technology | Brookfield vs. Pace Metals | Brookfield vs. Andean Precious Metals |
| HOME DEPOT vs. Nova Leap Health | HOME DEPOT vs. Dream Office Real | HOME DEPOT vs. Globex Mining Enterprises | HOME DEPOT vs. UnitedHealth Group CDR |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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