Correlation Between Home Depot and Innovator Long
Can any of the company-specific risk be diversified away by investing in both Home Depot and Innovator Long 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 Innovator Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Innovator Long Term, you can compare the effects of market volatilities on Home Depot and Innovator Long 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 Innovator Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Innovator Long.
Diversification Opportunities for Home Depot and Innovator Long
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Innovator is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Innovator Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Long Term 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 Innovator Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Long Term has no effect on the direction of Home Depot i.e., Home Depot and Innovator Long go up and down completely randomly.
Pair Corralation between Home Depot and Innovator Long
Allowing for the 90-day total investment horizon Home Depot is expected to generate 4.2 times more return on investment than Innovator Long. However, Home Depot is 4.2 times more volatile than Innovator Long Term. It trades about 0.27 of its potential returns per unit of risk. Innovator Long Term is currently generating about -0.07 per unit of risk. If you would invest 39,300 in Home Depot on August 30, 2024 and sell it today you would earn a total of 3,419 from holding Home Depot or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Innovator Long Term
Performance |
| Timeline |
| Home Depot |
| Innovator Long Term |
Home Depot and Innovator Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Innovator Long
The main advantage of trading using opposite Home Depot and Innovator Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Innovator Long 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 Innovator Long will offset losses from the drop in Innovator Long'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 |
| Innovator Long vs. Innovator 20 Year | Innovator Long vs. Northern Lights | Innovator Long vs. iShares 25 Year | Innovator Long vs. First Trust Exchange Traded |
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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