Correlation Between Home Depot and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Home Depot and Direxion Daily 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 Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Direxion Daily Dow, you can compare the effects of market volatilities on Home Depot and Direxion Daily 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 Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Direxion Daily.
Diversification Opportunities for Home Depot and Direxion Daily
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Home and Direxion is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Direxion Daily Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Dow 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 Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Dow has no effect on the direction of Home Depot i.e., Home Depot and Direxion Daily go up and down completely randomly.
Pair Corralation between Home Depot and Direxion Daily
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.43 times more return on investment than Direxion Daily. However, Home Depot is 2.31 times less risky than Direxion Daily. It trades about 0.3 of its potential returns per unit of risk. Direxion Daily Dow is currently generating about -0.38 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 Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Home Depot vs. Direxion Daily Dow
Performance |
| Timeline |
| Home Depot |
| Direxion Daily Dow |
Home Depot and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Direxion Daily
The main advantage of trading using opposite Home Depot and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Direxion Daily 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 Direxion Daily will offset losses from the drop in Direxion Daily'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 |
| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Dow | Direxion Daily vs. Direxion Daily Technology | Direxion Daily vs. Direxion Daily SP |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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