Correlation Between Home Depot and Parkland
Can any of the company-specific risk be diversified away by investing in both Home Depot and Parkland 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 Parkland into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Parkland, you can compare the effects of market volatilities on Home Depot and Parkland 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 Parkland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Parkland.
Diversification Opportunities for Home Depot and Parkland
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Parkland is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Parkland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parkland 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 Parkland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parkland has no effect on the direction of Home Depot i.e., Home Depot and Parkland go up and down completely randomly.
Pair Corralation between Home Depot and Parkland
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.54 times more return on investment than Parkland. However, Home Depot is 1.84 times less risky than Parkland. It trades about 0.09 of its potential returns per unit of risk. Parkland is currently generating about 0.02 per unit of risk. If you would invest 29,008 in Home Depot on August 31, 2024 and sell it today you would earn a total of 13,905 from holding Home Depot or generate 47.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.24% |
| Values | Daily Returns |
Home Depot vs. Parkland
Performance |
| Timeline |
| Home Depot |
| Parkland |
Home Depot and Parkland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Parkland
The main advantage of trading using opposite Home Depot and Parkland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Parkland 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 Parkland will offset losses from the drop in Parkland's long position.| Home Depot vs. RLJ Lodging Trust | Home Depot vs. Aquagold International | Home Depot vs. Stepstone Group | Home Depot vs. Morningstar Unconstrained Allocation |
| Parkland vs. Meso Numismatics | Parkland vs. Tandy Leather Factory | Parkland vs. EVgo Equity Warrants | Parkland vs. Sally Beauty Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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