Correlation Between Home Depot and Invesco RAFI
Can any of the company-specific risk be diversified away by investing in both Home Depot and Invesco RAFI 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 Invesco RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Invesco RAFI Strategic, you can compare the effects of market volatilities on Home Depot and Invesco RAFI 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 Invesco RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Invesco RAFI.
Diversification Opportunities for Home Depot and Invesco RAFI
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Invesco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Invesco RAFI Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco RAFI Strategic 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 Invesco RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco RAFI Strategic has no effect on the direction of Home Depot i.e., Home Depot and Invesco RAFI go up and down completely randomly.
Pair Corralation between Home Depot and Invesco RAFI
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.85 times more return on investment than Invesco RAFI. However, Home Depot is 1.85 times more volatile than Invesco RAFI Strategic. It trades about 0.06 of its potential returns per unit of risk. Invesco RAFI Strategic is currently generating about 0.11 per unit of risk. If you would invest 30,181 in Home Depot on August 31, 2024 and sell it today you would earn a total of 12,732 from holding Home Depot or generate 42.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Home Depot vs. Invesco RAFI Strategic
Performance |
| Timeline |
| Home Depot |
| Invesco RAFI Strategic |
Home Depot and Invesco RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Invesco RAFI
The main advantage of trading using opposite Home Depot and Invesco RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Invesco RAFI 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 Invesco RAFI will offset losses from the drop in Invesco RAFI's long position.| Home Depot vs. RLJ Lodging Trust | Home Depot vs. Aquagold International | Home Depot vs. Stepstone Group | Home Depot vs. Morningstar Unconstrained Allocation |
| Invesco RAFI vs. iShares Core SP | Invesco RAFI vs. iShares Core MSCI | Invesco RAFI vs. iShares Broad USD | Invesco RAFI vs. iShares Core SP |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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