Correlation Between Home Depot and Interfor
Can any of the company-specific risk be diversified away by investing in both Home Depot and Interfor 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 Interfor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Interfor, you can compare the effects of market volatilities on Home Depot and Interfor 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 Interfor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Interfor.
Diversification Opportunities for Home Depot and Interfor
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Interfor is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Interfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interfor 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 Interfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interfor has no effect on the direction of Home Depot i.e., Home Depot and Interfor go up and down completely randomly.
Pair Corralation between Home Depot and Interfor
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.81 times more return on investment than Interfor. However, Home Depot is 1.24 times less risky than Interfor. It trades about -0.04 of its potential returns per unit of risk. Interfor is currently generating about -0.06 per unit of risk. If you would invest 36,243 in Home Depot on January 11, 2025 and sell it today you would lose (881.00) from holding Home Depot or give up 2.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Interfor
Performance |
| Timeline |
| Home Depot |
| Interfor |
Home Depot and Interfor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Interfor
The main advantage of trading using opposite Home Depot and Interfor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Interfor 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 Interfor will offset losses from the drop in Interfor'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 |
| Interfor vs. Svenska Cellulosa Aktiebolaget | Interfor vs. Western Forest Products | Interfor vs. Stella Jones | Interfor vs. Simpson Manufacturing |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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