Correlation Between Home Depot and Pacer Lunt
Can any of the company-specific risk be diversified away by investing in both Home Depot and Pacer Lunt 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 Pacer Lunt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Pacer Lunt Large, you can compare the effects of market volatilities on Home Depot and Pacer Lunt 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 Pacer Lunt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Pacer Lunt.
Diversification Opportunities for Home Depot and Pacer Lunt
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Pacer is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Pacer Lunt Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Lunt Large 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 Pacer Lunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Lunt Large has no effect on the direction of Home Depot i.e., Home Depot and Pacer Lunt go up and down completely randomly.
Pair Corralation between Home Depot and Pacer Lunt
Allowing for the 90-day total investment horizon Home Depot is expected to generate 2.73 times more return on investment than Pacer Lunt. However, Home Depot is 2.73 times more volatile than Pacer Lunt Large. It trades about 0.29 of its potential returns per unit of risk. Pacer Lunt Large is currently generating about 0.51 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 3,563 from holding Home Depot or generate 9.05% 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. Pacer Lunt Large
Performance |
| Timeline |
| Home Depot |
| Pacer Lunt Large |
Home Depot and Pacer Lunt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Pacer Lunt
The main advantage of trading using opposite Home Depot and Pacer Lunt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Pacer Lunt 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 Pacer Lunt will offset losses from the drop in Pacer Lunt's long position.| Home Depot vs. Partner Communications | Home Depot vs. Merck Company | Home Depot vs. Western Midstream Partners | Home Depot vs. Edgewise Therapeutics |
| Pacer Lunt vs. Pacer Lunt Large | Pacer Lunt vs. Pacer Small Cap | Pacer Lunt vs. Pacer Lunt MidCap | Pacer Lunt vs. Pacer Cash Cows |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |