Correlation Between Home Depot and Cresco Labs
Can any of the company-specific risk be diversified away by investing in both Home Depot and Cresco Labs 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 Cresco Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Cresco Labs, you can compare the effects of market volatilities on Home Depot and Cresco Labs 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 Cresco Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Cresco Labs.
Diversification Opportunities for Home Depot and Cresco Labs
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Cresco is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Cresco Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresco Labs 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 Cresco Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cresco Labs has no effect on the direction of Home Depot i.e., Home Depot and Cresco Labs go up and down completely randomly.
Pair Corralation between Home Depot and Cresco Labs
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.2 times more return on investment than Cresco Labs. However, Home Depot is 5.11 times less risky than Cresco Labs. It trades about 0.2 of its potential returns per unit of risk. Cresco Labs is currently generating about -0.05 per unit of risk. If you would invest 37,044 in Home Depot on August 28, 2024 and sell it today you would earn a total of 5,908 from holding Home Depot or generate 15.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Cresco Labs
Performance |
| Timeline |
| Home Depot |
| Cresco Labs |
Home Depot and Cresco Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Cresco Labs
The main advantage of trading using opposite Home Depot and Cresco Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Cresco Labs 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 Cresco Labs will offset losses from the drop in Cresco Labs' long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
| Cresco Labs vs. Verano Holdings Corp | Cresco Labs vs. AYR Strategies Class | Cresco Labs vs. Green Thumb Industries | Cresco Labs vs. Marimed |
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 Stocks Directory module to find actively traded stocks across global markets.
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