Correlation Between HOME DEPOT and Western Investment
Can any of the company-specific risk be diversified away by investing in both HOME DEPOT and Western Investment 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 Western Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HOME DEPOT CDR and Western Investment, you can compare the effects of market volatilities on HOME DEPOT and Western Investment 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 Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and Western Investment.
Diversification Opportunities for HOME DEPOT and Western Investment
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between HOME and Western is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment 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 HOME DEPOT CDR are associated (or correlated) with Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Western Investment go up and down completely randomly.
Pair Corralation between HOME DEPOT and Western Investment
Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 0.87 times more return on investment than Western Investment. However, HOME DEPOT CDR is 1.15 times less risky than Western Investment. It trades about 0.19 of its potential returns per unit of risk. Western Investment is currently generating about -0.12 per unit of risk. If you would invest 2,605 in HOME DEPOT CDR on August 28, 2024 and sell it today you would earn a total of 161.00 from holding HOME DEPOT CDR or generate 6.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HOME DEPOT CDR vs. Western Investment
Performance |
| Timeline |
| HOME DEPOT CDR |
| Western Investment |
HOME DEPOT and Western Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HOME DEPOT and Western Investment
The main advantage of trading using opposite HOME DEPOT and Western Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HOME DEPOT position performs unexpectedly, Western Investment 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 Western Investment will offset losses from the drop in Western Investment's long position.| HOME DEPOT vs. Arbor Metals Corp | HOME DEPOT vs. Marimaca Copper Corp | HOME DEPOT vs. Data Communications Management | HOME DEPOT vs. Diamond Estates Wines |
| Western Investment vs. NVIDIA CDR | Western Investment vs. Apple Inc CDR | Western Investment vs. Microsoft Corp CDR | Western Investment vs. Amazon CDR |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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