Correlation Between Caledonia Investments and Home Depot
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments 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 Caledonia Investments and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and Home Depot, you can compare the effects of market volatilities on Caledonia Investments 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 Caledonia Investments with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and Home Depot.
Diversification Opportunities for Caledonia Investments and Home Depot
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caledonia and Home is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments i.e., Caledonia Investments and Home Depot go up and down completely randomly.
Pair Corralation between Caledonia Investments and Home Depot
If you would invest 343,000 in Caledonia Investments on October 10, 2024 and sell it today you would earn a total of 8,000 from holding Caledonia Investments or generate 2.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caledonia Investments vs. Home Depot
Performance |
| Timeline |
| Caledonia Investments |
| Home Depot |
Caledonia Investments and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and Home Depot
The main advantage of trading using opposite Caledonia Investments and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments 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.| Caledonia Investments vs. Chrysalis Investments | Caledonia Investments vs. Tavistock Investments Plc | Caledonia Investments vs. Cairo Communication SpA | Caledonia Investments vs. New Residential Investment |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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