Correlation Between Home Depot and SPDR Series
Can any of the company-specific risk be diversified away by investing in both Home Depot and SPDR Series 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 SPDR Series 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 SPDR Series Trust, you can compare the effects of market volatilities on Home Depot and SPDR Series 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 SPDR Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and SPDR Series.
Diversification Opportunities for Home Depot and SPDR Series
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and SPDR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and SPDR Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Series Trust 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 SPDR Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Series Trust has no effect on the direction of Home Depot i.e., Home Depot and SPDR Series go up and down completely randomly.
Pair Corralation between Home Depot and SPDR Series
Assuming the 90 days horizon Home Depot is expected to generate 1.48 times less return on investment than SPDR Series. But when comparing it to its historical volatility, The Home Depot is 1.23 times less risky than SPDR Series. It trades about 0.31 of its potential returns per unit of risk. SPDR Series Trust is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 262,000 in SPDR Series Trust on September 2, 2024 and sell it today you would earn a total of 39,100 from holding SPDR Series Trust or generate 14.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
The Home Depot vs. SPDR Series Trust
Performance |
| Timeline |
| Home Depot |
| SPDR Series Trust |
Home Depot and SPDR Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and SPDR Series
The main advantage of trading using opposite Home Depot and SPDR Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, SPDR Series 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 SPDR Series will offset losses from the drop in SPDR Series' long position.| Home Depot vs. Deutsche Bank Aktiengesellschaft | Home Depot vs. First Republic Bank | Home Depot vs. Monster Beverage Corp | Home Depot vs. Grupo Hotelero Santa |
| SPDR Series vs. SPDR Dow Jones | SPDR Series vs. SPDR Gold Trust | SPDR Series vs. SPDR SP 500 | SPDR Series vs. SPDR SP Regional |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |