Correlation Between Home Depot and ProShares MSCI
Can any of the company-specific risk be diversified away by investing in both Home Depot and ProShares MSCI 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 ProShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and ProShares MSCI Emerging, you can compare the effects of market volatilities on Home Depot and ProShares MSCI 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 ProShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and ProShares MSCI.
Diversification Opportunities for Home Depot and ProShares MSCI
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and ProShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ProShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares MSCI Emerging 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 ProShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares MSCI Emerging has no effect on the direction of Home Depot i.e., Home Depot and ProShares MSCI go up and down completely randomly.
Pair Corralation between Home Depot and ProShares MSCI
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.26 times more return on investment than ProShares MSCI. However, Home Depot is 1.26 times more volatile than ProShares MSCI Emerging. It trades about 0.19 of its potential returns per unit of risk. ProShares MSCI Emerging is currently generating about -0.15 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. ProShares MSCI Emerging
Performance |
| Timeline |
| Home Depot |
| ProShares MSCI Emerging |
Home Depot and ProShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and ProShares MSCI
The main advantage of trading using opposite Home Depot and ProShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, ProShares MSCI 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 ProShares MSCI will offset losses from the drop in ProShares MSCI's long position.The idea behind Home Depot and ProShares MSCI Emerging 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.| ProShares MSCI vs. Invesco PureBeta MSCI | ProShares MSCI vs. Aquagold International | ProShares MSCI vs. Morningstar Unconstrained Allocation | ProShares MSCI 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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