Correlation Between Home Depot and Industrial Select
Can any of the company-specific risk be diversified away by investing in both Home Depot and Industrial Select 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 Industrial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Industrial Select Sector, you can compare the effects of market volatilities on Home Depot and Industrial Select 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 Industrial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Industrial Select.
Diversification Opportunities for Home Depot and Industrial Select
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Industrial is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Industrial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Select Sector 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 Industrial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Select Sector has no effect on the direction of Home Depot i.e., Home Depot and Industrial Select go up and down completely randomly.
Pair Corralation between Home Depot and Industrial Select
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.08 times less return on investment than Industrial Select. In addition to that, Home Depot is 1.33 times more volatile than Industrial Select Sector. It trades about 0.11 of its total potential returns per unit of risk. Industrial Select Sector is currently generating about 0.16 per unit of volatility. If you would invest 13,397 in Industrial Select Sector on August 26, 2024 and sell it today you would earn a total of 868.00 from holding Industrial Select Sector or generate 6.48% 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. Industrial Select Sector
Performance |
| Timeline |
| Home Depot |
| Industrial Select Sector |
Home Depot and Industrial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Industrial Select
The main advantage of trading using opposite Home Depot and Industrial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Industrial Select 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 Industrial Select will offset losses from the drop in Industrial Select's long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
| Industrial Select vs. Gabelli ETFs Trust | Industrial Select vs. First Trust Exchange Traded | Industrial Select vs. Northern Lights | Industrial Select vs. First Trust Exchange Traded |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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