Correlation Between Home Depot and Las Vegas
Can any of the company-specific risk be diversified away by investing in both Home Depot and Las Vegas 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 Las Vegas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Las Vegas Sands, you can compare the effects of market volatilities on Home Depot and Las Vegas 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 Las Vegas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Las Vegas.
Diversification Opportunities for Home Depot and Las Vegas
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Las is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Las Vegas Sands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Las Vegas Sands 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 Las Vegas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Las Vegas Sands has no effect on the direction of Home Depot i.e., Home Depot and Las Vegas go up and down completely randomly.
Pair Corralation between Home Depot and Las Vegas
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.71 times more return on investment than Las Vegas. However, Home Depot is 1.4 times less risky than Las Vegas. It trades about 0.06 of its potential returns per unit of risk. Las Vegas Sands is currently generating about 0.02 per unit of risk. If you would invest 30,435 in Home Depot on August 30, 2024 and sell it today you would earn a total of 12,284 from holding Home Depot or generate 40.36% 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. Las Vegas Sands
Performance |
| Timeline |
| Home Depot |
| Las Vegas Sands |
Home Depot and Las Vegas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Las Vegas
The main advantage of trading using opposite Home Depot and Las Vegas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Las Vegas 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 Las Vegas will offset losses from the drop in Las Vegas' long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| Las Vegas vs. MGM Resorts International | Las Vegas vs. Caesars Entertainment | Las Vegas vs. Penn National Gaming | Las Vegas vs. Melco Resorts Entertainment |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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