Correlation Between Home Depot and Wilmington Trust
Can any of the company-specific risk be diversified away by investing in both Home Depot and Wilmington Trust 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 Wilmington Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Wilmington Trust Retirement, you can compare the effects of market volatilities on Home Depot and Wilmington Trust 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 Wilmington Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Wilmington Trust.
Diversification Opportunities for Home Depot and Wilmington Trust
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Wilmington is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Wilmington Trust Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Trust Ret 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 Wilmington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Trust Ret has no effect on the direction of Home Depot i.e., Home Depot and Wilmington Trust go up and down completely randomly.
Pair Corralation between Home Depot and Wilmington Trust
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.26 times more return on investment than Wilmington Trust. However, Home Depot is 1.26 times more volatile than Wilmington Trust Retirement. It trades about 0.07 of its potential returns per unit of risk. Wilmington Trust Retirement is currently generating about 0.08 per unit of risk. If you would invest 34,365 in Home Depot on September 14, 2024 and sell it today you would earn a total of 7,405 from holding Home Depot or generate 21.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Home Depot vs. Wilmington Trust Retirement
Performance |
| Timeline |
| Home Depot |
| Wilmington Trust Ret |
Home Depot and Wilmington Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Wilmington Trust
The main advantage of trading using opposite Home Depot and Wilmington Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Wilmington Trust 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 Wilmington Trust will offset losses from the drop in Wilmington Trust's long position.| Home Depot vs. Aquagold International | Home Depot vs. Thrivent High Yield | Home Depot vs. Morningstar Unconstrained Allocation | Home Depot vs. Via Renewables |
| Wilmington Trust vs. Ashmore Emerging Markets | Wilmington Trust vs. Shelton Emerging Markets | Wilmington Trust vs. Siit Emerging Markets | Wilmington Trust vs. Western Asset Diversified |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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