Correlation Between Home Depot and SemiLEDS
Can any of the company-specific risk be diversified away by investing in both Home Depot and SemiLEDS 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 SemiLEDS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and SemiLEDS, you can compare the effects of market volatilities on Home Depot and SemiLEDS 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 SemiLEDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and SemiLEDS.
Diversification Opportunities for Home Depot and SemiLEDS
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and SemiLEDS is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and SemiLEDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SemiLEDS 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 SemiLEDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SemiLEDS has no effect on the direction of Home Depot i.e., Home Depot and SemiLEDS go up and down completely randomly.
Pair Corralation between Home Depot and SemiLEDS
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.78 times less return on investment than SemiLEDS. But when comparing it to its historical volatility, Home Depot is 4.52 times less risky than SemiLEDS. It trades about 0.1 of its potential returns per unit of risk. SemiLEDS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 110.00 in SemiLEDS on August 24, 2024 and sell it today you would earn a total of 25.00 from holding SemiLEDS or generate 22.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. SemiLEDS
Performance |
| Timeline |
| Home Depot |
| SemiLEDS |
Home Depot and SemiLEDS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and SemiLEDS
The main advantage of trading using opposite Home Depot and SemiLEDS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, SemiLEDS 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 SemiLEDS will offset losses from the drop in SemiLEDS's long position.| Home Depot vs. Live Ventures | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies | Home Depot vs. Tile Shop Holdings |
| SemiLEDS vs. Eshallgo Class A | SemiLEDS vs. Amtech Systems | SemiLEDS vs. Gold Fields Ltd | SemiLEDS vs. Aegean Airlines SA |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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