Correlation Between Home Depot and VanEck Oil
Can any of the company-specific risk be diversified away by investing in both Home Depot and VanEck Oil 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 VanEck Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and VanEck Oil Refiners, you can compare the effects of market volatilities on Home Depot and VanEck Oil 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 VanEck Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and VanEck Oil.
Diversification Opportunities for Home Depot and VanEck Oil
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and VanEck is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and VanEck Oil Refiners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Oil Refiners 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 VanEck Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Oil Refiners has no effect on the direction of Home Depot i.e., Home Depot and VanEck Oil go up and down completely randomly.
Pair Corralation between Home Depot and VanEck Oil
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.31 times more return on investment than VanEck Oil. However, Home Depot is 1.31 times more volatile than VanEck Oil Refiners. It trades about 0.1 of its potential returns per unit of risk. VanEck Oil Refiners is currently generating about -0.01 per unit of risk. If you would invest 31,837 in Home Depot on September 2, 2024 and sell it today you would earn a total of 11,076 from holding Home Depot or generate 34.79% 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. VanEck Oil Refiners
Performance |
| Timeline |
| Home Depot |
| VanEck Oil Refiners |
Home Depot and VanEck Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and VanEck Oil
The main advantage of trading using opposite Home Depot and VanEck Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, VanEck Oil 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 VanEck Oil will offset losses from the drop in VanEck Oil'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 |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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