Correlation Between Home Depot and Greenlane Holdings
Can any of the company-specific risk be diversified away by investing in both Home Depot and Greenlane 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 Greenlane 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 Greenlane Holdings, you can compare the effects of market volatilities on Home Depot and Greenlane 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 Greenlane Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Greenlane Holdings.
Diversification Opportunities for Home Depot and Greenlane Holdings
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Greenlane is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Greenlane Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenlane Holdings 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 Greenlane Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenlane Holdings has no effect on the direction of Home Depot i.e., Home Depot and Greenlane Holdings go up and down completely randomly.
Pair Corralation between Home Depot and Greenlane Holdings
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.31 times more return on investment than Greenlane Holdings. However, Home Depot is 3.27 times less risky than Greenlane Holdings. It trades about 0.19 of its potential returns per unit of risk. Greenlane Holdings is currently generating about -0.6 per unit of risk. If you would invest 40,289 in Home Depot on August 28, 2024 and sell it today you would earn a total of 2,578 from holding Home Depot or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Greenlane Holdings
Performance |
| Timeline |
| Home Depot |
| Greenlane Holdings |
Home Depot and Greenlane Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Greenlane Holdings
The main advantage of trading using opposite Home Depot and Greenlane Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Greenlane 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 Greenlane Holdings will offset losses from the drop in Greenlane Holdings' long position.The idea behind Home Depot and Greenlane Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Greenlane Holdings vs. 1606 Corp | Greenlane Holdings vs. PT Hanjaya Mandala | Greenlane Holdings vs. Green Globe International | Greenlane Holdings vs. Kaival Brands Innovations |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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