Correlation Between Home Depot and Madison Aggressive
Can any of the company-specific risk be diversified away by investing in both Home Depot and Madison Aggressive 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 Madison Aggressive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Madison Aggressive Allocation, you can compare the effects of market volatilities on Home Depot and Madison Aggressive 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 Madison Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Madison Aggressive.
Diversification Opportunities for Home Depot and Madison Aggressive
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Madison is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Madison Aggressive Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Aggressive 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 Madison Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Aggressive has no effect on the direction of Home Depot i.e., Home Depot and Madison Aggressive go up and down completely randomly.
Pair Corralation between Home Depot and Madison Aggressive
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.35 times more return on investment than Madison Aggressive. However, Home Depot is 1.35 times more volatile than Madison Aggressive Allocation. It trades about 0.16 of its potential returns per unit of risk. Madison Aggressive Allocation is currently generating about -0.06 per unit of risk. If you would invest 39,614 in Home Depot on October 25, 2024 and sell it today you would earn a total of 1,396 from holding Home Depot or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Madison Aggressive Allocation
Performance |
| Timeline |
| Home Depot |
| Madison Aggressive |
Home Depot and Madison Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Madison Aggressive
The main advantage of trading using opposite Home Depot and Madison Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Madison Aggressive 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 Madison Aggressive will offset losses from the drop in Madison Aggressive's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| Madison Aggressive vs. Madison Covered Call | Madison Aggressive vs. Madison Diversified Income | Madison Aggressive vs. Madison Core Bond | Madison Aggressive vs. Madison Funds |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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