Correlation Between Home Depot and Earth Science
Can any of the company-specific risk be diversified away by investing in both Home Depot and Earth Science 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 Earth Science into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Earth Science Tech, you can compare the effects of market volatilities on Home Depot and Earth Science 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 Earth Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Earth Science.
Diversification Opportunities for Home Depot and Earth Science
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Earth is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Earth Science Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earth Science Tech 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 Earth Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earth Science Tech has no effect on the direction of Home Depot i.e., Home Depot and Earth Science go up and down completely randomly.
Pair Corralation between Home Depot and Earth Science
Allowing for the 90-day total investment horizon Home Depot is expected to generate 2.26 times less return on investment than Earth Science. But when comparing it to its historical volatility, Home Depot is 9.68 times less risky than Earth Science. It trades about 0.2 of its potential returns per unit of risk. Earth Science Tech is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14.00 in Earth Science Tech on August 29, 2024 and sell it today you would lose (1.00) from holding Earth Science Tech or give up 7.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Earth Science Tech
Performance |
| Timeline |
| Home Depot |
| Earth Science Tech |
Home Depot and Earth Science Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Earth Science
The main advantage of trading using opposite Home Depot and Earth Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Earth Science 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 Earth Science will offset losses from the drop in Earth Science's long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
| Earth Science vs. CuraScientific Corp | Earth Science vs. Ionic Brands Corp | Earth Science vs. Digital Development Partners | Earth Science vs. ManifestSeven Holdings |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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