Correlation Between Home Depot and East Resources
Can any of the company-specific risk be diversified away by investing in both Home Depot and East Resources 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 East Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and East Resources Acquisition, you can compare the effects of market volatilities on Home Depot and East Resources 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 East Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and East Resources.
Diversification Opportunities for Home Depot and East Resources
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and East is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and East Resources Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Resources Acqui 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 East Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Resources Acqui has no effect on the direction of Home Depot i.e., Home Depot and East Resources go up and down completely randomly.
Pair Corralation between Home Depot and East Resources
Allowing for the 90-day total investment horizon Home Depot is expected to generate 32.53 times less return on investment than East Resources. But when comparing it to its historical volatility, Home Depot is 12.22 times less risky than East Resources. It trades about 0.06 of its potential returns per unit of risk. East Resources Acquisition is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5.58 in East Resources Acquisition on August 25, 2024 and sell it today you would earn a total of 22.42 from holding East Resources Acquisition or generate 401.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 27.97% |
| Values | Daily Returns |
Home Depot vs. East Resources Acquisition
Performance |
| Timeline |
| Home Depot |
| East Resources Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Home Depot and East Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and East Resources
The main advantage of trading using opposite Home Depot and East Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, East Resources 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 East Resources will offset losses from the drop in East Resources' long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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