Correlation Between HUTCHMED China and Home Depot
Can any of the company-specific risk be diversified away by investing in both HUTCHMED China 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 HUTCHMED China and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HUTCHMED China and Home Depot, you can compare the effects of market volatilities on HUTCHMED China 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 HUTCHMED China with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUTCHMED China and Home Depot.
Diversification Opportunities for HUTCHMED China and Home Depot
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HUTCHMED and Home is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED China and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and HUTCHMED China 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 HUTCHMED China 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 HUTCHMED China i.e., HUTCHMED China and Home Depot go up and down completely randomly.
Pair Corralation between HUTCHMED China and Home Depot
Assuming the 90 days trading horizon HUTCHMED China is expected to generate 4.08 times more return on investment than Home Depot. However, HUTCHMED China is 4.08 times more volatile than Home Depot. It trades about 0.02 of its potential returns per unit of risk. Home Depot is currently generating about 0.03 per unit of risk. If you would invest 25,850 in HUTCHMED China on September 14, 2024 and sell it today you would lose (750.00) from holding HUTCHMED China or give up 2.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.8% |
| Values | Daily Returns |
HUTCHMED China vs. Home Depot
Performance |
| Timeline |
| HUTCHMED China |
| Home Depot |
HUTCHMED China and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HUTCHMED China and Home Depot
The main advantage of trading using opposite HUTCHMED China and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUTCHMED China 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.| HUTCHMED China vs. Home Depot | HUTCHMED China vs. River and Mercantile | HUTCHMED China vs. Chrysalis Investments | HUTCHMED China vs. NVIDIA Corp |
| Home Depot vs. One Media iP | Home Depot vs. LBG Media PLC | Home Depot vs. Intermediate Capital Group | Home Depot vs. Catalyst Media Group |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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