Correlation Between Home Depot and Digital Ally
Can any of the company-specific risk be diversified away by investing in both Home Depot and Digital Ally 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 Digital Ally into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Digital Ally, you can compare the effects of market volatilities on Home Depot and Digital Ally 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 Digital Ally. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Digital Ally.
Diversification Opportunities for Home Depot and Digital Ally
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Digital is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Digital Ally in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Ally 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 Digital Ally. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Ally has no effect on the direction of Home Depot i.e., Home Depot and Digital Ally go up and down completely randomly.
Pair Corralation between Home Depot and Digital Ally
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.12 times more return on investment than Digital Ally. However, Home Depot is 8.04 times less risky than Digital Ally. It trades about 0.19 of its potential returns per unit of risk. Digital Ally is currently generating about -0.02 per unit of risk. If you would invest 40,289 in Home Depot on August 28, 2024 and sell it today you would earn a total of 2,578 from holding Home Depot or generate 6.4% 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. Digital Ally
Performance |
| Timeline |
| Home Depot |
| Digital Ally |
Home Depot and Digital Ally Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Digital Ally
The main advantage of trading using opposite Home Depot and Digital Ally positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Digital Ally 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 Digital Ally will offset losses from the drop in Digital Ally's long position.The idea behind Home Depot and Digital Ally pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Digital Ally vs. Zedge Inc | Digital Ally vs. 36Kr Holdings | Digital Ally vs. MediaAlpha | Digital Ally vs. Vivid Seats |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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