Correlation Between Home Depot and Biodesix
Can any of the company-specific risk be diversified away by investing in both Home Depot and Biodesix 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 Biodesix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Biodesix, you can compare the effects of market volatilities on Home Depot and Biodesix 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 Biodesix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Biodesix.
Diversification Opportunities for Home Depot and Biodesix
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Biodesix is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Biodesix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biodesix 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 Biodesix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biodesix has no effect on the direction of Home Depot i.e., Home Depot and Biodesix go up and down completely randomly.
Pair Corralation between Home Depot and Biodesix
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.28 times more return on investment than Biodesix. However, Home Depot is 3.54 times less risky than Biodesix. It trades about 0.04 of its potential returns per unit of risk. Biodesix is currently generating about -0.03 per unit of risk. If you would invest 28,671 in Home Depot on January 13, 2025 and sell it today you would earn a total of 6,715 from holding Home Depot or generate 23.42% 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. Biodesix
Performance |
| Timeline |
| Home Depot |
| Biodesix |
Home Depot and Biodesix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Biodesix
The main advantage of trading using opposite Home Depot and Biodesix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Biodesix 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 Biodesix will offset losses from the drop in Biodesix's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands |
| Biodesix vs. Aclaris Therapeutics | Biodesix vs. Castle Biosciences | Biodesix vs. Prenetics Global | Biodesix vs. DarioHealth 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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