Correlation Between Home Depot and Barclays ETN
Can any of the company-specific risk be diversified away by investing in both Home Depot and Barclays ETN 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 Barclays ETN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Barclays ETN Select, you can compare the effects of market volatilities on Home Depot and Barclays ETN 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 Barclays ETN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Barclays ETN.
Diversification Opportunities for Home Depot and Barclays ETN
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Barclays is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Barclays ETN Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays ETN Select 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 Barclays ETN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays ETN Select has no effect on the direction of Home Depot i.e., Home Depot and Barclays ETN go up and down completely randomly.
Pair Corralation between Home Depot and Barclays ETN
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.57 times less return on investment than Barclays ETN. In addition to that, Home Depot is 1.46 times more volatile than Barclays ETN Select. It trades about 0.06 of its total potential returns per unit of risk. Barclays ETN Select is currently generating about 0.13 per unit of volatility. If you would invest 1,714 in Barclays ETN Select on August 27, 2024 and sell it today you would earn a total of 1,284 from holding Barclays ETN Select or generate 74.91% 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. Barclays ETN Select
Performance |
| Timeline |
| Home Depot |
| Barclays ETN Select |
Home Depot and Barclays ETN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Barclays ETN
The main advantage of trading using opposite Home Depot and Barclays ETN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Barclays ETN 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 Barclays ETN will offset losses from the drop in Barclays ETN's long position.The idea behind Home Depot and Barclays ETN Select pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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