Correlation Between Home Depot and BZAM
Can any of the company-specific risk be diversified away by investing in both Home Depot and BZAM 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 BZAM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and BZAM, you can compare the effects of market volatilities on Home Depot and BZAM 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 BZAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and BZAM.
Diversification Opportunities for Home Depot and BZAM
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and BZAM is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM 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 BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of Home Depot i.e., Home Depot and BZAM go up and down completely randomly.
Pair Corralation between Home Depot and BZAM
Allowing for the 90-day total investment horizon Home Depot is expected to generate 92.41 times less return on investment than BZAM. But when comparing it to its historical volatility, Home Depot is 78.08 times less risky than BZAM. It trades about 0.07 of its potential returns per unit of risk. BZAM is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 13.00 in BZAM on August 26, 2024 and sell it today you would lose (12.99) from holding BZAM or give up 99.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.7% |
| Values | Daily Returns |
Home Depot vs. BZAM
Performance |
| Timeline |
| Home Depot |
| BZAM |
Home Depot and BZAM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and BZAM
The main advantage of trading using opposite Home Depot and BZAM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, BZAM 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 BZAM will offset losses from the drop in BZAM's long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
| BZAM vs. Udemy Inc | BZAM vs. Bright Scholar Education | BZAM vs. Evolution Mining | BZAM vs. WEBTOON Entertainment Common |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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