Correlation Between Home Depot and Invesco Actively
Can any of the company-specific risk be diversified away by investing in both Home Depot and Invesco Actively 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 Invesco Actively into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Invesco Actively Managed, you can compare the effects of market volatilities on Home Depot and Invesco Actively 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 Invesco Actively. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Invesco Actively.
Diversification Opportunities for Home Depot and Invesco Actively
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Invesco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Invesco Actively Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Actively Managed 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 Invesco Actively. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Actively Managed has no effect on the direction of Home Depot i.e., Home Depot and Invesco Actively go up and down completely randomly.
Pair Corralation between Home Depot and Invesco Actively
Allowing for the 90-day total investment horizon Home Depot is expected to generate 2.04 times more return on investment than Invesco Actively. However, Home Depot is 2.04 times more volatile than Invesco Actively Managed. It trades about 0.18 of its potential returns per unit of risk. Invesco Actively Managed is currently generating about 0.14 per unit of risk. If you would invest 32,432 in Home Depot on September 1, 2024 and sell it today you would earn a total of 10,481 from holding Home Depot or generate 32.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 76.98% |
| Values | Daily Returns |
Home Depot vs. Invesco Actively Managed
Performance |
| Timeline |
| Home Depot |
| Invesco Actively Managed |
Home Depot and Invesco Actively Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Invesco Actively
The main advantage of trading using opposite Home Depot and Invesco Actively positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Invesco Actively 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 Invesco Actively will offset losses from the drop in Invesco Actively's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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