Correlation Between Home Depot and Flow Capital
Can any of the company-specific risk be diversified away by investing in both Home Depot and Flow Capital 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 Flow Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Flow Capital Corp, you can compare the effects of market volatilities on Home Depot and Flow Capital 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 Flow Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Flow Capital.
Diversification Opportunities for Home Depot and Flow Capital
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Flow is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Flow Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flow Capital Corp 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 are associated (or correlated) with Flow Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flow Capital Corp has no effect on the direction of Home Depot i.e., Home Depot and Flow Capital go up and down completely randomly.
Pair Corralation between Home Depot and Flow Capital
If you would invest 39,046 in Home Depot on August 31, 2024 and sell it today you would earn a total of 3,673 from holding Home Depot or generate 9.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Flow Capital Corp
Performance |
| Timeline |
| Home Depot |
| Flow Capital Corp |
Home Depot and Flow Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Flow Capital
The main advantage of trading using opposite Home Depot and Flow Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Flow Capital 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 Flow Capital will offset losses from the drop in Flow Capital's long position.| Home Depot vs. RLJ Lodging Trust | Home Depot vs. Aquagold International | Home Depot vs. Stepstone Group | Home Depot vs. Morningstar Unconstrained Allocation |
| Flow Capital vs. Guardian Capital Group | Flow Capital vs. Urbana | Flow Capital vs. Princeton Capital | Flow Capital vs. Blackhawk Growth Corp |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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