Correlation Between Home Depot and Franklin Templeton
Can any of the company-specific risk be diversified away by investing in both Home Depot and Franklin Templeton 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 Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Franklin Templeton ETF, you can compare the effects of market volatilities on Home Depot and Franklin Templeton 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 Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Franklin Templeton.
Diversification Opportunities for Home Depot and Franklin Templeton
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Franklin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Franklin Templeton ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton ETF 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 Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton ETF has no effect on the direction of Home Depot i.e., Home Depot and Franklin Templeton go up and down completely randomly.
Pair Corralation between Home Depot and Franklin Templeton
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.33 times more return on investment than Franklin Templeton. However, Home Depot is 1.33 times more volatile than Franklin Templeton ETF. It trades about 0.09 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about 0.06 per unit of risk. If you would invest 28,387 in Home Depot on August 27, 2024 and sell it today you would earn a total of 13,613 from holding Home Depot or generate 47.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Franklin Templeton ETF
Performance |
| Timeline |
| Home Depot |
| Franklin Templeton ETF |
Home Depot and Franklin Templeton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Franklin Templeton
The main advantage of trading using opposite Home Depot and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Franklin Templeton 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 Franklin Templeton will offset losses from the drop in Franklin Templeton's long position.The idea behind Home Depot and Franklin Templeton ETF 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.| Franklin Templeton vs. Invesco PureBeta MSCI | Franklin Templeton vs. Aquagold International | Franklin Templeton vs. Morningstar Unconstrained Allocation | Franklin Templeton vs. High Yield Municipal Fund |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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