Correlation Between Home Depot and JPMorgan Equity
Can any of the company-specific risk be diversified away by investing in both Home Depot and JPMorgan Equity 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 JPMorgan Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and JPMorgan Equity Focus, you can compare the effects of market volatilities on Home Depot and JPMorgan Equity 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 JPMorgan Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and JPMorgan Equity.
Diversification Opportunities for Home Depot and JPMorgan Equity
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and JPMorgan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and JPMorgan Equity Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Equity Focus 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 JPMorgan Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Equity Focus has no effect on the direction of Home Depot i.e., Home Depot and JPMorgan Equity go up and down completely randomly.
Pair Corralation between Home Depot and JPMorgan Equity
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.56 times more return on investment than JPMorgan Equity. However, Home Depot is 1.56 times more volatile than JPMorgan Equity Focus. It trades about 0.09 of its potential returns per unit of risk. JPMorgan Equity Focus is currently generating about 0.12 per unit of risk. If you would invest 35,551 in Home Depot on September 3, 2024 and sell it today you would earn a total of 7,362 from holding Home Depot or generate 20.71% 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. JPMorgan Equity Focus
Performance |
| Timeline |
| Home Depot |
| JPMorgan Equity Focus |
Home Depot and JPMorgan Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and JPMorgan Equity
The main advantage of trading using opposite Home Depot and JPMorgan Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, JPMorgan Equity 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 JPMorgan Equity will offset losses from the drop in JPMorgan Equity's long position.| Home Depot vs. Partner Communications | Home Depot vs. Merck Company | Home Depot vs. Western Midstream Partners | Home Depot vs. Edgewise Therapeutics |
| JPMorgan Equity vs. Vanguard Total Stock | JPMorgan Equity vs. SPDR SP 500 | JPMorgan Equity vs. iShares Core SP | JPMorgan Equity vs. Vanguard Dividend Appreciation |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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