Correlation Between Home Depot and Coupang LLC
Can any of the company-specific risk be diversified away by investing in both Home Depot and Coupang LLC 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 Coupang LLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Coupang LLC, you can compare the effects of market volatilities on Home Depot and Coupang LLC 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 Coupang LLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Coupang LLC.
Diversification Opportunities for Home Depot and Coupang LLC
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Coupang is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Coupang LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang LLC 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 Coupang LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang LLC has no effect on the direction of Home Depot i.e., Home Depot and Coupang LLC go up and down completely randomly.
Pair Corralation between Home Depot and Coupang LLC
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.42 times more return on investment than Coupang LLC. However, Home Depot is 2.36 times less risky than Coupang LLC. It trades about 0.26 of its potential returns per unit of risk. Coupang LLC is currently generating about -0.02 per unit of risk. If you would invest 39,300 in Home Depot on August 30, 2024 and sell it today you would earn a total of 3,419 from holding Home Depot or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Home Depot vs. Coupang LLC
Performance |
| Timeline |
| Home Depot |
| Coupang LLC |
Home Depot and Coupang LLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Coupang LLC
The main advantage of trading using opposite Home Depot and Coupang LLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Coupang LLC 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 Coupang LLC will offset losses from the drop in Coupang LLC'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 |
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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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