Correlation Between Home Depot and Enbridge
Can any of the company-specific risk be diversified away by investing in both Home Depot and Enbridge 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 Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Enbridge, you can compare the effects of market volatilities on Home Depot and Enbridge 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 Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Enbridge.
Diversification Opportunities for Home Depot and Enbridge
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Home and Enbridge is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge 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 Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Home Depot i.e., Home Depot and Enbridge go up and down completely randomly.
Pair Corralation between Home Depot and Enbridge
Allowing for the 90-day total investment horizon Home Depot is expected to generate 3.35 times more return on investment than Enbridge. However, Home Depot is 3.35 times more volatile than Enbridge. It trades about 0.28 of its potential returns per unit of risk. Enbridge is currently generating about 0.34 per unit of risk. If you would invest 39,350 in Home Depot on September 5, 2024 and sell it today you would earn a total of 3,585 from holding Home Depot or generate 9.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Enbridge
Performance |
| Timeline |
| Home Depot |
| Enbridge |
Home Depot and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Enbridge
The main advantage of trading using opposite Home Depot and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Enbridge 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 Enbridge will offset losses from the drop in Enbridge's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands |
| Enbridge vs. GasLog Partners LP | Enbridge vs. GasLog Partners LP | Enbridge vs. NGL Energy Partners | Enbridge vs. Seapeak LLC |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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