Correlation Between Home Depot and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both Home Depot and MicroSectors FANG 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 MicroSectors FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and MicroSectors FANG Index, you can compare the effects of market volatilities on Home Depot and MicroSectors FANG 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 MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and MicroSectors FANG.
Diversification Opportunities for Home Depot and MicroSectors FANG
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and MicroSectors is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index 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 MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of Home Depot i.e., Home Depot and MicroSectors FANG go up and down completely randomly.
Pair Corralation between Home Depot and MicroSectors FANG
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.34 times more return on investment than MicroSectors FANG. However, Home Depot is 2.91 times less risky than MicroSectors FANG. It trades about 0.26 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about 0.07 per unit of risk. If you would invest 39,300 in Home Depot on August 30, 2024 and sell it today you would earn a total of 3,419 from holding Home Depot or generate 8.7% 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. MicroSectors FANG Index
Performance |
| Timeline |
| Home Depot |
| MicroSectors FANG Index |
Home Depot and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and MicroSectors FANG
The main advantage of trading using opposite Home Depot and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| MicroSectors FANG vs. ABIVAX Socit Anonyme | MicroSectors FANG vs. Morningstar Unconstrained Allocation | MicroSectors FANG vs. SPACE | MicroSectors FANG vs. Knife River |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |