Correlation Between Home Depot and MCF Energy
Can any of the company-specific risk be diversified away by investing in both Home Depot and MCF Energy 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 MCF Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and MCF Energy, you can compare the effects of market volatilities on Home Depot and MCF Energy 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 MCF Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and MCF Energy.
Diversification Opportunities for Home Depot and MCF Energy
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and MCF is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and MCF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCF Energy 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 MCF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCF Energy has no effect on the direction of Home Depot i.e., Home Depot and MCF Energy go up and down completely randomly.
Pair Corralation between Home Depot and MCF Energy
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.14 times more return on investment than MCF Energy. However, Home Depot is 7.06 times less risky than MCF Energy. It trades about 0.29 of its potential returns per unit of risk. MCF Energy is currently generating about -0.25 per unit of risk. If you would invest 39,350 in Home Depot on September 3, 2024 and sell it today you would earn a total of 3,563 from holding Home Depot or generate 9.05% 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. MCF Energy
Performance |
| Timeline |
| Home Depot |
| MCF Energy |
Home Depot and MCF Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and MCF Energy
The main advantage of trading using opposite Home Depot and MCF Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, MCF Energy 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 MCF Energy will offset losses from the drop in MCF Energy's long position.| Home Depot vs. Partner Communications | Home Depot vs. Merck Company | Home Depot vs. Western Midstream Partners | Home Depot vs. Edgewise Therapeutics |
| MCF Energy vs. Apple Inc | MCF Energy vs. Microsoft | MCF Energy vs. Amazon Inc | MCF Energy vs. Alphabet Inc Class C |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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