Correlation Between Home Depot and Eco (Atlantic)
Can any of the company-specific risk be diversified away by investing in both Home Depot and Eco (Atlantic) 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 Eco (Atlantic) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Eco Oil Gas, you can compare the effects of market volatilities on Home Depot and Eco (Atlantic) 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 Eco (Atlantic). Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Eco (Atlantic).
Diversification Opportunities for Home Depot and Eco (Atlantic)
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Eco is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Eco Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco (Atlantic) 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 Eco (Atlantic). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco (Atlantic) has no effect on the direction of Home Depot i.e., Home Depot and Eco (Atlantic) go up and down completely randomly.
Pair Corralation between Home Depot and Eco (Atlantic)
Allowing for the 90-day total investment horizon Home Depot is expected to generate 2.94 times less return on investment than Eco (Atlantic). But when comparing it to its historical volatility, Home Depot is 7.11 times less risky than Eco (Atlantic). It trades about 0.1 of its potential returns per unit of risk. Eco Oil Gas is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Eco Oil Gas on August 26, 2024 and sell it today you would earn a total of 0.00 from holding Eco Oil Gas or generate 0.0% 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. Eco Oil Gas
Performance |
| Timeline |
| Home Depot |
| Eco (Atlantic) |
Home Depot and Eco (Atlantic) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Eco (Atlantic)
The main advantage of trading using opposite Home Depot and Eco (Atlantic) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Eco (Atlantic) 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 Eco (Atlantic) will offset losses from the drop in Eco (Atlantic)'s long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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