Correlation Between Home Depot and Information Services
Can any of the company-specific risk be diversified away by investing in both Home Depot and Information Services 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 Information Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Information Services, you can compare the effects of market volatilities on Home Depot and Information Services 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 Information Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Information Services.
Diversification Opportunities for Home Depot and Information Services
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Information is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Home Depot i.e., Home Depot and Information Services go up and down completely randomly.
Pair Corralation between Home Depot and Information Services
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.6 times less return on investment than Information Services. But when comparing it to its historical volatility, Home Depot is 1.92 times less risky than Information Services. It trades about 0.08 of its potential returns per unit of risk. Information Services is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,543 in Information Services on September 12, 2024 and sell it today you would earn a total of 405.00 from holding Information Services or generate 26.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 53.17% |
| Values | Daily Returns |
Home Depot vs. Information Services
Performance |
| Timeline |
| Home Depot |
| Information Services |
Home Depot and Information Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Information Services
The main advantage of trading using opposite Home Depot and Information Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Information Services 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 Information Services will offset losses from the drop in Information Services' long position.| Home Depot vs. Victory Integrity Smallmid Cap | Home Depot vs. Hilton Worldwide Holdings | Home Depot vs. NVIDIA | Home Depot vs. JPMorgan Chase Co |
| Information Services vs. Figs Inc | Information Services vs. Skechers USA | Information Services vs. Atmos Energy | Information Services vs. GE Vernova LLC |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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