Correlation Between Home Depot and ETF Series
Can any of the company-specific risk be diversified away by investing in both Home Depot and ETF Series 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 ETF Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and ETF Series Solutions, you can compare the effects of market volatilities on Home Depot and ETF Series 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 ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and ETF Series.
Diversification Opportunities for Home Depot and ETF Series
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and ETF is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Home Depot i.e., Home Depot and ETF Series go up and down completely randomly.
Pair Corralation between Home Depot and ETF Series
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.19 times more return on investment than ETF Series. However, Home Depot is 1.19 times more volatile than ETF Series Solutions. It trades about 0.05 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.03 per unit of risk. If you would invest 35,402 in Home Depot on November 3, 2024 and sell it today you would earn a total of 5,796 from holding Home Depot or generate 16.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Home Depot vs. ETF Series Solutions
Performance |
| Timeline |
| Home Depot |
| ETF Series Solutions |
Home Depot and ETF Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and ETF Series
The main advantage of trading using opposite Home Depot and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, ETF Series 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 ETF Series will offset losses from the drop in ETF Series' long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| ETF Series vs. Distillate Fundamental Stability | ETF Series vs. ETF Series Solutions | ETF Series vs. Fairlead Tactical Sector | ETF Series vs. VanEck ETF Trust |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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