Correlation Between Home Depot and Future Fund
Can any of the company-specific risk be diversified away by investing in both Home Depot and Future Fund 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 Future Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and The Future Fund, you can compare the effects of market volatilities on Home Depot and Future Fund 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 Future Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Future Fund.
Diversification Opportunities for Home Depot and Future Fund
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Future is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and The Future Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Fund 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 Future Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Fund has no effect on the direction of Home Depot i.e., Home Depot and Future Fund go up and down completely randomly.
Pair Corralation between Home Depot and Future Fund
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.29 times more return on investment than Future Fund. However, Home Depot is 1.29 times more volatile than The Future Fund. It trades about 0.29 of its potential returns per unit of risk. The Future Fund is currently generating about 0.25 per unit of risk. If you would invest 39,046 in Home Depot on August 31, 2024 and sell it today you would earn a total of 3,673 from holding Home Depot or generate 9.41% 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. The Future Fund
Performance |
| Timeline |
| Home Depot |
| Future Fund |
Home Depot and Future Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Future Fund
The main advantage of trading using opposite Home Depot and Future Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Future Fund 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 Future Fund will offset losses from the drop in Future Fund's long position.| Home Depot vs. RLJ Lodging Trust | Home Depot vs. Aquagold International | Home Depot vs. Stepstone Group | Home Depot vs. Morningstar Unconstrained Allocation |
| Future Fund vs. Vanguard Growth Index | Future Fund vs. iShares Russell 1000 | Future Fund vs. iShares SP 500 | Future Fund vs. iShares Core SP |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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