Correlation Between Home Depot and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Home Depot and Goldman Sachs 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 Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Goldman Sachs MarketBeta, you can compare the effects of market volatilities on Home Depot and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Goldman Sachs.
Diversification Opportunities for Home Depot and Goldman Sachs
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Goldman is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Goldman Sachs MarketBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs MarketBeta 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs MarketBeta has no effect on the direction of Home Depot i.e., Home Depot and Goldman Sachs go up and down completely randomly.
Pair Corralation between Home Depot and Goldman Sachs
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.18 times less return on investment than Goldman Sachs. In addition to that, Home Depot is 1.6 times more volatile than Goldman Sachs MarketBeta. It trades about 0.07 of its total potential returns per unit of risk. Goldman Sachs MarketBeta is currently generating about 0.12 per unit of volatility. If you would invest 5,256 in Goldman Sachs MarketBeta on November 19, 2024 and sell it today you would earn a total of 3,182 from holding Goldman Sachs MarketBeta or generate 60.54% 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. Goldman Sachs MarketBeta
Performance |
| Timeline |
| Home Depot |
| Goldman Sachs MarketBeta |
Home Depot and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Goldman Sachs
The main advantage of trading using opposite Home Depot and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies | Home Depot vs. Kirklands |
| Goldman Sachs vs. Goldman Sachs MarketBeta | Goldman Sachs vs. Goldman Sachs Access | Goldman Sachs vs. Goldman Sachs ActiveBeta | Goldman Sachs vs. Goldman Sachs ActiveBeta |
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 CEOs Directory module to screen CEOs from public companies around the world.
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