Correlation Between Home Depot and MicroSectorsTM Oil
Can any of the company-specific risk be diversified away by investing in both Home Depot and MicroSectorsTM Oil 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 MicroSectorsTM Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and MicroSectorsTM Oil Gas, you can compare the effects of market volatilities on Home Depot and MicroSectorsTM Oil 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 MicroSectorsTM Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and MicroSectorsTM Oil.
Diversification Opportunities for Home Depot and MicroSectorsTM Oil
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and MicroSectorsTM is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and MicroSectorsTM Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectorsTM Oil Gas 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 MicroSectorsTM Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectorsTM Oil Gas has no effect on the direction of Home Depot i.e., Home Depot and MicroSectorsTM Oil go up and down completely randomly.
Pair Corralation between Home Depot and MicroSectorsTM Oil
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.45 times more return on investment than MicroSectorsTM Oil. However, Home Depot is 2.21 times less risky than MicroSectorsTM Oil. It trades about 0.16 of its potential returns per unit of risk. MicroSectorsTM Oil Gas is currently generating about -0.31 per unit of risk. If you would invest 39,891 in Home Depot on August 26, 2024 and sell it today you would earn a total of 2,109 from holding Home Depot or generate 5.29% 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. MicroSectorsTM Oil Gas
Performance |
| Timeline |
| Home Depot |
| MicroSectorsTM Oil Gas |
Home Depot and MicroSectorsTM Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and MicroSectorsTM Oil
The main advantage of trading using opposite Home Depot and MicroSectorsTM Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, MicroSectorsTM Oil 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 MicroSectorsTM Oil will offset losses from the drop in MicroSectorsTM Oil's long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
| MicroSectorsTM Oil vs. MicroSectorsTM Oil Gas | MicroSectorsTM Oil vs. UBS ETRACS | MicroSectorsTM Oil vs. Direxion Daily SP | MicroSectorsTM Oil vs. MicroSectors FANG Index |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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