Correlation Between Home Depot and Gores Holdings
Can any of the company-specific risk be diversified away by investing in both Home Depot and Gores Holdings 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 Gores Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Gores Holdings IX, you can compare the effects of market volatilities on Home Depot and Gores Holdings 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 Gores Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Gores Holdings.
Diversification Opportunities for Home Depot and Gores Holdings
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and Gores is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Gores Holdings IX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gores Holdings IX 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 Gores Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gores Holdings IX has no effect on the direction of Home Depot i.e., Home Depot and Gores Holdings go up and down completely randomly.
Pair Corralation between Home Depot and Gores Holdings
Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Gores Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Home Depot is 48.48 times less risky than Gores Holdings. The stock trades about -0.07 of its potential returns per unit of risk. The Gores Holdings IX is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 0.70 in Gores Holdings IX on November 3, 2024 and sell it today you would lose (0.20) from holding Gores Holdings IX or give up 28.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 9.76% |
| Values | Daily Returns |
Home Depot vs. Gores Holdings IX
Performance |
| Timeline |
| Home Depot |
| Gores Holdings IX |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Home Depot and Gores Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Gores Holdings
The main advantage of trading using opposite Home Depot and Gores Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Gores Holdings 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 Gores Holdings will offset losses from the drop in Gores Holdings' long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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