Correlation Between Home Depot and Vanguard Health
Can any of the company-specific risk be diversified away by investing in both Home Depot and Vanguard Health 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 Vanguard Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Vanguard Health Care, you can compare the effects of market volatilities on Home Depot and Vanguard Health 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 Vanguard Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Vanguard Health.
Diversification Opportunities for Home Depot and Vanguard Health
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Vanguard is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Vanguard Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Health Care 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 Vanguard Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Health Care has no effect on the direction of Home Depot i.e., Home Depot and Vanguard Health go up and down completely randomly.
Pair Corralation between Home Depot and Vanguard Health
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.62 times more return on investment than Vanguard Health. However, Home Depot is 1.62 times more volatile than Vanguard Health Care. It trades about 0.26 of its potential returns per unit of risk. Vanguard Health Care is currently generating about -0.02 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Vanguard Health Care
Performance |
| Timeline |
| Home Depot |
| Vanguard Health Care |
Home Depot and Vanguard Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Vanguard Health
The main advantage of trading using opposite Home Depot and Vanguard Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Vanguard Health 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 Vanguard Health will offset losses from the drop in Vanguard Health'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 |
| Vanguard Health vs. Vanguard Consumer Staples | Vanguard Health vs. Vanguard Financials Index | Vanguard Health vs. Vanguard Information Technology | Vanguard Health vs. Vanguard Consumer Discretionary |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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