Correlation Between Home Depot and Paid
Can any of the company-specific risk be diversified away by investing in both Home Depot and Paid 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 Paid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Paid Inc, you can compare the effects of market volatilities on Home Depot and Paid 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 Paid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Paid.
Diversification Opportunities for Home Depot and Paid
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Paid is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Paid Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paid Inc 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 Paid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paid Inc has no effect on the direction of Home Depot i.e., Home Depot and Paid go up and down completely randomly.
Pair Corralation between Home Depot and Paid
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.92 times less return on investment than Paid. But when comparing it to its historical volatility, Home Depot is 3.67 times less risky than Paid. It trades about 0.27 of its potential returns per unit of risk. Paid Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 263.00 in Paid Inc on September 4, 2024 and sell it today you would earn a total of 35.00 from holding Paid Inc or generate 13.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Home Depot vs. Paid Inc
Performance |
| Timeline |
| Home Depot |
| Paid Inc |
Home Depot and Paid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Paid
The main advantage of trading using opposite Home Depot and Paid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Paid 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 Paid will offset losses from the drop in Paid's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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