Correlation Between Home Depot and Themes Airlines
Can any of the company-specific risk be diversified away by investing in both Home Depot and Themes Airlines 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 Themes Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Themes Airlines ETF, you can compare the effects of market volatilities on Home Depot and Themes Airlines 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 Themes Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Themes Airlines.
Diversification Opportunities for Home Depot and Themes Airlines
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Themes is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Themes Airlines ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Airlines ETF 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 Themes Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Airlines ETF has no effect on the direction of Home Depot i.e., Home Depot and Themes Airlines go up and down completely randomly.
Pair Corralation between Home Depot and Themes Airlines
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.59 times more return on investment than Themes Airlines. However, Home Depot is 1.59 times more volatile than Themes Airlines ETF. It trades about 0.27 of its potential returns per unit of risk. Themes Airlines ETF is currently generating about 0.34 per unit of risk. If you would invest 39,350 in Home Depot on September 3, 2024 and sell it today you would earn a total of 3,346 from holding Home Depot or generate 8.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Themes Airlines ETF
Performance |
| Timeline |
| Home Depot |
| Themes Airlines ETF |
Home Depot and Themes Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Themes Airlines
The main advantage of trading using opposite Home Depot and Themes Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Themes Airlines 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 Themes Airlines will offset losses from the drop in Themes Airlines' long position.| Home Depot vs. Partner Communications | Home Depot vs. Merck Company | Home Depot vs. Western Midstream Partners | Home Depot vs. Edgewise Therapeutics |
| Themes Airlines vs. First Trust Indxx | Themes Airlines vs. Direxion Daily Industrials | Themes Airlines vs. NATO | Themes Airlines vs. FlexShares STOXX Global |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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