Correlation Between Spirent Communications and Home Depot
Can any of the company-specific risk be diversified away by investing in both Spirent Communications 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 Spirent Communications and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirent Communications plc and The Home Depot, you can compare the effects of market volatilities on Spirent Communications 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 Spirent Communications with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Home Depot.
Diversification Opportunities for Spirent Communications and Home Depot
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Spirent and Home is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Spirent Communications 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 Spirent Communications plc 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 Spirent Communications i.e., Spirent Communications and Home Depot go up and down completely randomly.
Pair Corralation between Spirent Communications and Home Depot
Assuming the 90 days horizon Spirent Communications is expected to generate 12.4 times less return on investment than Home Depot. In addition to that, Spirent Communications is 3.29 times more volatile than The Home Depot. It trades about 0.0 of its total potential returns per unit of risk. The Home Depot is currently generating about 0.06 per unit of volatility. If you would invest 28,977 in The Home Depot on August 29, 2024 and sell it today you would earn a total of 11,493 from holding The Home Depot or generate 39.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. The Home Depot
Performance |
| Timeline |
| Spirent Communications |
| Home Depot |
Spirent Communications and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Home Depot
The main advantage of trading using opposite Spirent Communications and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications 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.| Spirent Communications vs. Verizon Communications | Spirent Communications vs. ATT Inc | Spirent Communications vs. ATT Inc | Spirent Communications vs. Deutsche Telekom AG |
| Home Depot vs. Sekisui Chemical Co | Home Depot vs. Iridium Communications | Home Depot vs. Spirent Communications plc | Home Depot vs. INDO RAMA SYNTHETIC |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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