Correlation Between Home Depot and Shoe Carnival
Can any of the company-specific risk be diversified away by investing in both Home Depot and Shoe Carnival 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 Shoe Carnival into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Shoe Carnival, you can compare the effects of market volatilities on Home Depot and Shoe Carnival 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 Shoe Carnival. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Shoe Carnival.
Diversification Opportunities for Home Depot and Shoe Carnival
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Shoe is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Shoe Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoe Carnival 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 Shoe Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoe Carnival has no effect on the direction of Home Depot i.e., Home Depot and Shoe Carnival go up and down completely randomly.
Pair Corralation between Home Depot and Shoe Carnival
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.61 times more return on investment than Shoe Carnival. However, Home Depot is 1.65 times less risky than Shoe Carnival. It trades about 0.29 of its potential returns per unit of risk. Shoe Carnival is currently generating about -0.08 per unit of risk. If you would invest 39,046 in Home Depot on August 31, 2024 and sell it today you would earn a total of 3,673 from holding Home Depot or generate 9.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Shoe Carnival
Performance |
| Timeline |
| Home Depot |
| Shoe Carnival |
Home Depot and Shoe Carnival Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Shoe Carnival
The main advantage of trading using opposite Home Depot and Shoe Carnival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Shoe Carnival 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 Shoe Carnival will offset losses from the drop in Shoe Carnival'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 |
| Shoe Carnival vs. Citi Trends | Shoe Carnival vs. Zumiez Inc | Shoe Carnival vs. Buckle Inc | Shoe Carnival vs. Cato Corporation |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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