Correlation Between Home Depot and BridgeBio Pharma
Can any of the company-specific risk be diversified away by investing in both Home Depot and BridgeBio Pharma 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 BridgeBio Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and BridgeBio Pharma, you can compare the effects of market volatilities on Home Depot and BridgeBio Pharma 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 BridgeBio Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and BridgeBio Pharma.
Diversification Opportunities for Home Depot and BridgeBio Pharma
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and BridgeBio is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and BridgeBio Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BridgeBio Pharma 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 BridgeBio Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BridgeBio Pharma has no effect on the direction of Home Depot i.e., Home Depot and BridgeBio Pharma go up and down completely randomly.
Pair Corralation between Home Depot and BridgeBio Pharma
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.61 times less return on investment than BridgeBio Pharma. But when comparing it to its historical volatility, Home Depot is 3.27 times less risky than BridgeBio Pharma. It trades about 0.27 of its potential returns per unit of risk. BridgeBio Pharma is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,450 in BridgeBio Pharma on August 30, 2024 and sell it today you would earn a total of 299.00 from holding BridgeBio Pharma or generate 12.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. BridgeBio Pharma
Performance |
| Timeline |
| Home Depot |
| BridgeBio Pharma |
Home Depot and BridgeBio Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and BridgeBio Pharma
The main advantage of trading using opposite Home Depot and BridgeBio Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, BridgeBio Pharma 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 BridgeBio Pharma will offset losses from the drop in BridgeBio Pharma's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| BridgeBio Pharma vs. Blueprint Medicines Corp | BridgeBio Pharma vs. Amylyx Pharmaceuticals | BridgeBio Pharma vs. Day One Biopharmaceuticals | BridgeBio Pharma vs. Terns Pharmaceuticals |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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