Correlation Between Home Depot and SEI Exchange
Can any of the company-specific risk be diversified away by investing in both Home Depot and SEI Exchange 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 SEI Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and SEI Exchange Traded, you can compare the effects of market volatilities on Home Depot and SEI Exchange 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 SEI Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and SEI Exchange.
Diversification Opportunities for Home Depot and SEI Exchange
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and SEI is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and SEI Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Exchange Traded 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 SEI Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Exchange Traded has no effect on the direction of Home Depot i.e., Home Depot and SEI Exchange go up and down completely randomly.
Pair Corralation between Home Depot and SEI Exchange
Allowing for the 90-day total investment horizon Home Depot is expected to generate 2.38 times more return on investment than SEI Exchange. However, Home Depot is 2.38 times more volatile than SEI Exchange Traded. It trades about 0.08 of its potential returns per unit of risk. SEI Exchange Traded is currently generating about 0.14 per unit of risk. If you would invest 31,838 in Home Depot on September 3, 2024 and sell it today you would earn a total of 10,858 from holding Home Depot or generate 34.1% 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. SEI Exchange Traded
Performance |
| Timeline |
| Home Depot |
| SEI Exchange Traded |
Home Depot and SEI Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and SEI Exchange
The main advantage of trading using opposite Home Depot and SEI Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, SEI Exchange 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 SEI Exchange will offset losses from the drop in SEI Exchange's long position.| Home Depot vs. Partner Communications | Home Depot vs. Merck Company | Home Depot vs. Western Midstream Partners | Home Depot vs. Edgewise Therapeutics |
| SEI Exchange vs. Global X Funds | SEI Exchange vs. Dell Technologies | SEI Exchange vs. Juniper Networks | SEI Exchange vs. HUMANA INC |
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 Stocks Directory module to find actively traded stocks across global markets.
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