Correlation Between Home Depot and FT Vest

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Can any of the company-specific risk be diversified away by investing in both Home Depot and FT Vest 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 FT Vest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and FT Vest Nasdaq 100, you can compare the effects of market volatilities on Home Depot and FT Vest 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 FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and FT Vest.

Diversification Opportunities for Home Depot and FT Vest

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Home and QMNV is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and FT Vest Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Nasdaq 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 FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Nasdaq has no effect on the direction of Home Depot i.e., Home Depot and FT Vest go up and down completely randomly.

Pair Corralation between Home Depot and FT Vest

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.23 times less return on investment than FT Vest. In addition to that, Home Depot is 5.13 times more volatile than FT Vest Nasdaq 100. It trades about 0.08 of its total potential returns per unit of risk. FT Vest Nasdaq 100 is currently generating about 0.5 per unit of volatility. If you would invest  1,995  in FT Vest Nasdaq 100 on September 12, 2024 and sell it today you would earn a total of  42.00  from holding FT Vest Nasdaq 100 or generate 2.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy5.14%
ValuesDaily Returns

Home Depot  vs.  FT Vest Nasdaq 100

 Performance 
       Timeline  
Home Depot 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.
FT Vest Nasdaq 

Risk-Adjusted Performance

39 of 100

 
Weak
 
Strong
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Nasdaq 100 are ranked lower than 39 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, FT Vest may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Home Depot and FT Vest Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and FT Vest

The main advantage of trading using opposite Home Depot and FT Vest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, FT Vest 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 FT Vest will offset losses from the drop in FT Vest's long position.
The idea behind Home Depot and FT Vest Nasdaq 100 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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