Correlation Between Home Depot and Strategy Shares
Can any of the company-specific risk be diversified away by investing in both Home Depot and Strategy Shares 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 Strategy Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Strategy Shares, you can compare the effects of market volatilities on Home Depot and Strategy Shares 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 Strategy Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Strategy Shares.
Diversification Opportunities for Home Depot and Strategy Shares
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Strategy is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Strategy Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares 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 Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares has no effect on the direction of Home Depot i.e., Home Depot and Strategy Shares go up and down completely randomly.
Pair Corralation between Home Depot and Strategy Shares
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.15 times more return on investment than Strategy Shares. However, Home Depot is 1.15 times more volatile than Strategy Shares. It trades about 0.06 of its potential returns per unit of risk. Strategy Shares is currently generating about 0.05 per unit of risk. If you would invest 31,147 in Home Depot on September 2, 2024 and sell it today you would earn a total of 11,766 from holding Home Depot or generate 37.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 31.05% |
| Values | Daily Returns |
Home Depot vs. Strategy Shares
Performance |
| Timeline |
| Home Depot |
| Strategy Shares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Home Depot and Strategy Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Strategy Shares
The main advantage of trading using opposite Home Depot and Strategy Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Strategy Shares 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 Strategy Shares will offset losses from the drop in Strategy Shares' long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| Strategy Shares vs. Vanguard Growth Index | Strategy Shares vs. iShares Russell 1000 | Strategy Shares vs. iShares SP 500 | Strategy Shares vs. iShares Core SP |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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