Correlation Between Home Depot and NSTAR Electric
Can any of the company-specific risk be diversified away by investing in both Home Depot and NSTAR Electric 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 NSTAR Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and NSTAR Electric, you can compare the effects of market volatilities on Home Depot and NSTAR Electric 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 NSTAR Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and NSTAR Electric.
Diversification Opportunities for Home Depot and NSTAR Electric
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and NSTAR is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and NSTAR Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR Electric 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 NSTAR Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTAR Electric has no effect on the direction of Home Depot i.e., Home Depot and NSTAR Electric go up and down completely randomly.
Pair Corralation between Home Depot and NSTAR Electric
If you would invest 39,053 in Home Depot on September 2, 2024 and sell it today you would earn a total of 3,860 from holding Home Depot or generate 9.88% 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. NSTAR Electric
Performance |
| Timeline |
| Home Depot |
| NSTAR Electric |
Home Depot and NSTAR Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and NSTAR Electric
The main advantage of trading using opposite Home Depot and NSTAR Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, NSTAR Electric 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 NSTAR Electric will offset losses from the drop in NSTAR Electric'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 |
| NSTAR Electric vs. Southern Company | NSTAR Electric vs. Duke Energy | NSTAR Electric vs. Duke Energy | NSTAR Electric vs. National Grid PLC |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |