Correlation Between Home Depot and IShares Core
Can any of the company-specific risk be diversified away by investing in both Home Depot and IShares Core 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 Core 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 Core SP, you can compare the effects of market volatilities on Home Depot and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and IShares Core.
Diversification Opportunities for Home Depot and IShares Core
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Home Depot i.e., Home Depot and IShares Core go up and down completely randomly.
Pair Corralation between Home Depot and IShares Core
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.95 times more return on investment than IShares Core. However, Home Depot is 1.95 times more volatile than iShares Core SP. It trades about 0.13 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.19 per unit of risk. If you would invest 40,268 in Home Depot on August 25, 2024 and sell it today you would earn a total of 1,732 from holding Home Depot or generate 4.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. iShares Core SP
Performance |
| Timeline |
| Home Depot |
| iShares Core SP |
Home Depot and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and IShares Core
The main advantage of trading using opposite Home Depot and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
| IShares Core vs. iShares Core SP | IShares Core vs. iShares Core MSCI | IShares Core vs. iShares Broad USD | IShares Core 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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