Correlation Between Home Depot and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Home Depot and IShares Trust 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 IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and iShares Trust, you can compare the effects of market volatilities on Home Depot and IShares Trust 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 IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and IShares Trust.
Diversification Opportunities for Home Depot and IShares Trust
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and IShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Home Depot i.e., Home Depot and IShares Trust go up and down completely randomly.
Pair Corralation between Home Depot and IShares Trust
Allowing for the 90-day total investment horizon Home Depot is expected to generate 10.23 times more return on investment than IShares Trust. However, Home Depot is 10.23 times more volatile than iShares Trust. It trades about 0.25 of its potential returns per unit of risk. iShares Trust is currently generating about 0.32 per unit of risk. If you would invest 38,899 in Home Depot on November 1, 2024 and sell it today you would earn a total of 2,551 from holding Home Depot or generate 6.56% 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. iShares Trust
Performance |
| Timeline |
| Home Depot |
| iShares Trust |
Home Depot and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and IShares Trust
The main advantage of trading using opposite Home Depot and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, IShares Trust 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 IShares Trust will offset losses from the drop in IShares Trust'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 |
| IShares Trust vs. iShares iBonds Dec | IShares Trust vs. iShares iBonds Dec | IShares Trust vs. iShares iBonds Dec | IShares Trust vs. iShares iBonds Dec |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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