Correlation Between Home Depot and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Home Depot and IShares MSCI 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 IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and iShares MSCI USA, you can compare the effects of market volatilities on Home Depot and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and IShares MSCI.
Diversification Opportunities for Home Depot and IShares MSCI
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of Home Depot i.e., Home Depot and IShares MSCI go up and down completely randomly.
Pair Corralation between Home Depot and IShares MSCI
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.58 times more return on investment than IShares MSCI. However, Home Depot is 1.58 times more volatile than iShares MSCI USA. It trades about 0.3 of its potential returns per unit of risk. iShares MSCI USA is currently generating about 0.32 per unit of risk. If you would invest 39,169 in Home Depot on September 1, 2024 and sell it today you would earn a total of 3,744 from holding Home Depot or generate 9.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. iShares MSCI USA
Performance |
| Timeline |
| Home Depot |
| iShares MSCI USA |
Home Depot and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and IShares MSCI
The main advantage of trading using opposite Home Depot and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI'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 |
| IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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