Correlation Between Home Depot and FibraHotel
Can any of the company-specific risk be diversified away by investing in both Home Depot and FibraHotel 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 Home Depot and FibraHotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Home Depot and FibraHotel, you can compare the effects of market volatilities on Home Depot and FibraHotel 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 Home Depot with a short position of FibraHotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and FibraHotel.
Diversification Opportunities for Home Depot and FibraHotel
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and FibraHotel is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel and Home Depot 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 The Home Depot are associated (or correlated) with FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Home Depot i.e., Home Depot and FibraHotel go up and down completely randomly.
Pair Corralation between Home Depot and FibraHotel
Assuming the 90 days horizon The Home Depot is expected to generate 0.5 times more return on investment than FibraHotel. However, The Home Depot is 2.02 times less risky than FibraHotel. It trades about 0.07 of its potential returns per unit of risk. FibraHotel is currently generating about 0.01 per unit of risk. If you would invest 730,698 in The Home Depot on November 28, 2024 and sell it today you would earn a total of 89,552 from holding The Home Depot or generate 12.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. FibraHotel
Performance |
| Timeline |
| Home Depot |
| FibraHotel |
Home Depot and FibraHotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and FibraHotel
The main advantage of trading using opposite Home Depot and FibraHotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, FibraHotel 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 FibraHotel will offset losses from the drop in FibraHotel's long position.| Home Depot vs. CVS Health | Home Depot vs. Deutsche Bank Aktiengesellschaft | Home Depot vs. Ameriprise Financial | Home Depot vs. Cognizant Technology Solutions |
| FibraHotel vs. Burlington Stores | FibraHotel vs. Ross Stores | FibraHotel vs. FIBRA Storage | FibraHotel vs. DXC Technology |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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