Correlation Between Home Depot and Western Sierra
Can any of the company-specific risk be diversified away by investing in both Home Depot and Western Sierra 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 Western Sierra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Western Sierra Mining, you can compare the effects of market volatilities on Home Depot and Western Sierra 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 Western Sierra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Western Sierra.
Diversification Opportunities for Home Depot and Western Sierra
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Western is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Western Sierra Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Sierra Mining 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 Western Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Sierra Mining has no effect on the direction of Home Depot i.e., Home Depot and Western Sierra go up and down completely randomly.
Pair Corralation between Home Depot and Western Sierra
Allowing for the 90-day total investment horizon Home Depot is expected to generate 142.72 times less return on investment than Western Sierra. But when comparing it to its historical volatility, Home Depot is 78.25 times less risky than Western Sierra. It trades about 0.05 of its potential returns per unit of risk. Western Sierra Mining is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 8.45 in Western Sierra Mining on August 31, 2024 and sell it today you would lose (7.77) from holding Western Sierra Mining or give up 91.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Western Sierra Mining
Performance |
| Timeline |
| Home Depot |
| Western Sierra Mining |
Home Depot and Western Sierra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Western Sierra
The main advantage of trading using opposite Home Depot and Western Sierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Western Sierra 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 Western Sierra will offset losses from the drop in Western Sierra's long position.| Home Depot vs. RLJ Lodging Trust | Home Depot vs. Aquagold International | Home Depot vs. Stepstone Group | Home Depot vs. Morningstar Unconstrained Allocation |
| Western Sierra vs. Green Cures Botanical | Western Sierra vs. Cann American Corp | Western Sierra vs. Rimrock Gold Corp | Western Sierra vs. Galexxy Holdings |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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