Correlation Between Home Depot and Cult Food
Can any of the company-specific risk be diversified away by investing in both Home Depot and Cult Food 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 Cult Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Cult Food Science, you can compare the effects of market volatilities on Home Depot and Cult Food 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 Cult Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Cult Food.
Diversification Opportunities for Home Depot and Cult Food
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Cult is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Cult Food Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cult Food Science 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 Cult Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cult Food Science has no effect on the direction of Home Depot i.e., Home Depot and Cult Food go up and down completely randomly.
Pair Corralation between Home Depot and Cult Food
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.22 times more return on investment than Cult Food. However, Home Depot is 4.55 times less risky than Cult Food. It trades about 0.29 of its potential returns per unit of risk. Cult Food Science is currently generating about 0.02 per unit of risk. If you would invest 39,046 in Home Depot on August 31, 2024 and sell it today you would earn a total of 3,673 from holding Home Depot or generate 9.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Cult Food Science
Performance |
| Timeline |
| Home Depot |
| Cult Food Science |
Home Depot and Cult Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Cult Food
The main advantage of trading using opposite Home Depot and Cult Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Cult Food 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 Cult Food will offset losses from the drop in Cult Food's long position.| Home Depot vs. RLJ Lodging Trust | Home Depot vs. Aquagold International | Home Depot vs. Stepstone Group | Home Depot vs. Morningstar Unconstrained Allocation |
| Cult Food vs. Branded Legacy | Cult Food vs. BAB Inc | Cult Food vs. Bioharvest Sciences | Cult Food vs. Else Nutrition Holdings |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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