Correlation Between Telefonaktiebolaget and Home Depot
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget 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 Telefonaktiebolaget and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonaktiebolaget LM Ericsson and The Home Depot, you can compare the effects of market volatilities on Telefonaktiebolaget 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 Telefonaktiebolaget with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Home Depot.
Diversification Opportunities for Telefonaktiebolaget and Home Depot
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telefonaktiebolaget and Home is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Telefonaktiebolaget 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 Telefonaktiebolaget LM Ericsson 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 Telefonaktiebolaget i.e., Telefonaktiebolaget and Home Depot go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Home Depot
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to under-perform the Home Depot. In addition to that, Telefonaktiebolaget is 1.1 times more volatile than The Home Depot. It trades about -0.16 of its total potential returns per unit of risk. The Home Depot is currently generating about 0.22 per unit of volatility. If you would invest 8,210 in The Home Depot on August 28, 2024 and sell it today you would earn a total of 490.00 from holding The Home Depot or generate 5.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. The Home Depot
Performance |
| Timeline |
| Telefonaktiebolaget |
| Home Depot |
Telefonaktiebolaget and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Home Depot
The main advantage of trading using opposite Telefonaktiebolaget and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget 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.| Telefonaktiebolaget vs. Monster Beverage | Telefonaktiebolaget vs. Dell Technologies | Telefonaktiebolaget vs. Marfrig Global Foods | Telefonaktiebolaget vs. MAHLE Metal Leve |
| Home Depot vs. Fras le SA | Home Depot vs. Clave Indices De | Home Depot vs. BTG Pactual Logstica | Home Depot vs. Telefonaktiebolaget LM Ericsson |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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