Correlation Between Home Depot and Mercato Partners
Can any of the company-specific risk be diversified away by investing in both Home Depot and Mercato Partners 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 Mercato Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Mercato Partners Acquisition, you can compare the effects of market volatilities on Home Depot and Mercato Partners 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 Mercato Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Mercato Partners.
Diversification Opportunities for Home Depot and Mercato Partners
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Mercato is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Mercato Partners Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercato Partners Acq 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 Mercato Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercato Partners Acq has no effect on the direction of Home Depot i.e., Home Depot and Mercato Partners go up and down completely randomly.
Pair Corralation between Home Depot and Mercato Partners
Allowing for the 90-day total investment horizon Home Depot is expected to generate 107.53 times less return on investment than Mercato Partners. But when comparing it to its historical volatility, Home Depot is 30.26 times less risky than Mercato Partners. It trades about 0.06 of its potential returns per unit of risk. Mercato Partners Acquisition is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.90 in Mercato Partners Acquisition on August 30, 2024 and sell it today you would earn a total of 9.10 from holding Mercato Partners Acquisition or generate 1011.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 21.21% |
| Values | Daily Returns |
Home Depot vs. Mercato Partners Acquisition
Performance |
| Timeline |
| Home Depot |
| Mercato Partners Acq |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Home Depot and Mercato Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Mercato Partners
The main advantage of trading using opposite Home Depot and Mercato Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Mercato Partners 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 Mercato Partners will offset losses from the drop in Mercato Partners' long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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