Correlation Between Home Depot and Innovator Nasdaq
Can any of the company-specific risk be diversified away by investing in both Home Depot and Innovator Nasdaq 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 Innovator Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Innovator Nasdaq 100 Power, you can compare the effects of market volatilities on Home Depot and Innovator Nasdaq 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 Innovator Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Innovator Nasdaq.
Diversification Opportunities for Home Depot and Innovator Nasdaq
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Innovator is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Innovator Nasdaq 100 Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Nasdaq 100 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 Innovator Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Nasdaq 100 has no effect on the direction of Home Depot i.e., Home Depot and Innovator Nasdaq go up and down completely randomly.
Pair Corralation between Home Depot and Innovator Nasdaq
Allowing for the 90-day total investment horizon Home Depot is expected to generate 5.11 times more return on investment than Innovator Nasdaq. However, Home Depot is 5.11 times more volatile than Innovator Nasdaq 100 Power. It trades about 0.13 of its potential returns per unit of risk. Innovator Nasdaq 100 Power is currently generating about 0.22 per unit of risk. If you would invest 40,268 in Home Depot on August 25, 2024 and sell it today you would earn a total of 1,732 from holding Home Depot or generate 4.3% 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. Innovator Nasdaq 100 Power
Performance |
| Timeline |
| Home Depot |
| Innovator Nasdaq 100 |
Home Depot and Innovator Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Innovator Nasdaq
The main advantage of trading using opposite Home Depot and Innovator Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Innovator Nasdaq 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 Innovator Nasdaq will offset losses from the drop in Innovator Nasdaq's long position.| Home Depot vs. Live Ventures | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| Innovator Nasdaq vs. First Trust Cboe | Innovator Nasdaq vs. FT Cboe Vest | Innovator Nasdaq vs. Innovator SP 500 | Innovator Nasdaq vs. Innovator Equity Power |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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