Correlation Between Home Depot and PIMCO Preferred
Can any of the company-specific risk be diversified away by investing in both Home Depot and PIMCO Preferred 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 PIMCO Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and PIMCO Preferred And, you can compare the effects of market volatilities on Home Depot and PIMCO Preferred 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 PIMCO Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and PIMCO Preferred.
Diversification Opportunities for Home Depot and PIMCO Preferred
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and PIMCO is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and PIMCO Preferred And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Preferred And 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 PIMCO Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Preferred And has no effect on the direction of Home Depot i.e., Home Depot and PIMCO Preferred go up and down completely randomly.
Pair Corralation between Home Depot and PIMCO Preferred
Allowing for the 90-day total investment horizon Home Depot is expected to generate 6.73 times more return on investment than PIMCO Preferred. However, Home Depot is 6.73 times more volatile than PIMCO Preferred And. It trades about 0.16 of its potential returns per unit of risk. PIMCO Preferred And is currently generating about 0.23 per unit of risk. If you would invest 32,446 in Home Depot on August 26, 2024 and sell it today you would earn a total of 9,554 from holding Home Depot or generate 29.45% 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. PIMCO Preferred And
Performance |
| Timeline |
| Home Depot |
| PIMCO Preferred And |
Home Depot and PIMCO Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and PIMCO Preferred
The main advantage of trading using opposite Home Depot and PIMCO Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, PIMCO Preferred 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 PIMCO Preferred will offset losses from the drop in PIMCO Preferred's long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
| PIMCO Preferred vs. ETF Series Solutions | PIMCO Preferred vs. Aquagold International | PIMCO Preferred vs. Morningstar Unconstrained Allocation | PIMCO Preferred vs. High Yield Municipal Fund |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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