Correlation Between Home Depot and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Home Depot and ProShares UltraShort 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 ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and ProShares UltraShort MidCap400, you can compare the effects of market volatilities on Home Depot and ProShares UltraShort 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 ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and ProShares UltraShort.
Diversification Opportunities for Home Depot and ProShares UltraShort
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Home and ProShares is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ProShares UltraShort MidCap400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort 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 ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Home Depot i.e., Home Depot and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Home Depot and ProShares UltraShort
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.63 times more return on investment than ProShares UltraShort. However, Home Depot is 1.59 times less risky than ProShares UltraShort. It trades about 0.06 of its potential returns per unit of risk. ProShares UltraShort MidCap400 is currently generating about -0.05 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. ProShares UltraShort MidCap400
Performance |
| Timeline |
| Home Depot |
| ProShares UltraShort |
Home Depot and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and ProShares UltraShort
The main advantage of trading using opposite Home Depot and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, ProShares UltraShort 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 ProShares UltraShort will offset losses from the drop in ProShares UltraShort'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 |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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