Correlation Between Home Depot and 7591EPAR1

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Can any of the company-specific risk be diversified away by investing in both Home Depot and 7591EPAR1 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 7591EPAR1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and RF 575, you can compare the effects of market volatilities on Home Depot and 7591EPAR1 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 7591EPAR1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and 7591EPAR1.

Diversification Opportunities for Home Depot and 7591EPAR1

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between Home and 7591EPAR1 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and RF 575 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 7591EPAR1 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 7591EPAR1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 7591EPAR1 has no effect on the direction of Home Depot i.e., Home Depot and 7591EPAR1 go up and down completely randomly.

Pair Corralation between Home Depot and 7591EPAR1

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.36 times more return on investment than 7591EPAR1. However, Home Depot is 1.36 times more volatile than RF 575. It trades about 0.29 of its potential returns per unit of risk. RF 575 is currently generating about -0.2 per unit of risk. If you would invest  39,350  in Home Depot on September 3, 2024 and sell it today you would earn a total of  3,563  from holding Home Depot or generate 9.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.0%
ValuesDaily Returns

Home Depot  vs.  RF 575

 Performance 
       Timeline  
Home Depot 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.
7591EPAR1 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days RF 575 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, 7591EPAR1 is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Depot and 7591EPAR1 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and 7591EPAR1

The main advantage of trading using opposite Home Depot and 7591EPAR1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, 7591EPAR1 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 7591EPAR1 will offset losses from the drop in 7591EPAR1's long position.
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The idea behind Home Depot and RF 575 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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