Correlation Between Home Depot and Lifestore Financial
Can any of the company-specific risk be diversified away by investing in both Home Depot and Lifestore Financial 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 Lifestore Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Lifestore Financial Group, you can compare the effects of market volatilities on Home Depot and Lifestore Financial 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 Lifestore Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Lifestore Financial.
Diversification Opportunities for Home Depot and Lifestore Financial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Lifestore is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Lifestore Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifestore Financial 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 Lifestore Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifestore Financial has no effect on the direction of Home Depot i.e., Home Depot and Lifestore Financial go up and down completely randomly.
Pair Corralation between Home Depot and Lifestore Financial
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.45 times more return on investment than Lifestore Financial. However, Home Depot is 2.23 times less risky than Lifestore Financial. It trades about 0.06 of its potential returns per unit of risk. Lifestore Financial Group is currently generating about 0.01 per unit of risk. If you would invest 31,111 in Home Depot on September 5, 2024 and sell it today you would earn a total of 11,824 from holding Home Depot or generate 38.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 86.87% |
| Values | Daily Returns |
Home Depot vs. Lifestore Financial Group
Performance |
| Timeline |
| Home Depot |
| Lifestore Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Home Depot and Lifestore Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Lifestore Financial
The main advantage of trading using opposite Home Depot and Lifestore Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Lifestore Financial 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 Lifestore Financial will offset losses from the drop in Lifestore Financial's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands |
| Lifestore Financial vs. NETGEAR | Lifestore Financial vs. Marfrig Global Foods | Lifestore Financial vs. Bridgford Foods | Lifestore Financial vs. Uber Technologies |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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