Correlation Between Home Depot and TCL Electronics
Can any of the company-specific risk be diversified away by investing in both Home Depot and TCL Electronics 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 TCL Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and TCL Electronics Holdings, you can compare the effects of market volatilities on Home Depot and TCL Electronics 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 TCL Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and TCL Electronics.
Diversification Opportunities for Home Depot and TCL Electronics
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and TCL is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and TCL Electronics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCL Electronics Holdings 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 TCL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCL Electronics Holdings has no effect on the direction of Home Depot i.e., Home Depot and TCL Electronics go up and down completely randomly.
Pair Corralation between Home Depot and TCL Electronics
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.31 times more return on investment than TCL Electronics. However, Home Depot is 3.22 times less risky than TCL Electronics. It trades about 0.09 of its potential returns per unit of risk. TCL Electronics Holdings is currently generating about -0.03 per unit of risk. If you would invest 39,964 in Home Depot on August 24, 2024 and sell it today you would earn a total of 1,081 from holding Home Depot or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. TCL Electronics Holdings
Performance |
| Timeline |
| Home Depot |
| TCL Electronics Holdings |
Home Depot and TCL Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and TCL Electronics
The main advantage of trading using opposite Home Depot and TCL Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, TCL Electronics 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 TCL Electronics will offset losses from the drop in TCL Electronics' long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Live Ventures | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| TCL Electronics vs. PT Astra International | TCL Electronics vs. FIT Hon Teng | TCL Electronics vs. WH Group Limited | TCL Electronics vs. Thai Beverage Public |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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