Correlation Between Home Depot and FT Cboe
Can any of the company-specific risk be diversified away by investing in both Home Depot and FT Cboe 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 FT Cboe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and FT Cboe Vest, you can compare the effects of market volatilities on Home Depot and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and FT Cboe.
Diversification Opportunities for Home Depot and FT Cboe
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and XNOV is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Home Depot i.e., Home Depot and FT Cboe go up and down completely randomly.
Pair Corralation between Home Depot and FT Cboe
Allowing for the 90-day total investment horizon Home Depot is expected to generate 17.05 times more return on investment than FT Cboe. However, Home Depot is 17.05 times more volatile than FT Cboe Vest. It trades about 0.11 of its potential returns per unit of risk. FT Cboe Vest is currently generating about 0.58 per unit of risk. If you would invest 40,520 in Home Depot on August 29, 2024 and sell it today you would earn a total of 2,287 from holding Home Depot or generate 5.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. FT Cboe Vest
Performance |
| Timeline |
| Home Depot |
| FT Cboe Vest |
Home Depot and FT Cboe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and FT Cboe
The main advantage of trading using opposite Home Depot and FT Cboe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, FT Cboe 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 FT Cboe will offset losses from the drop in FT Cboe'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 |
| FT Cboe vs. ABIVAX Socit Anonyme | FT Cboe vs. Pinnacle Sherman Multi Strategy | FT Cboe vs. Morningstar Unconstrained Allocation | FT Cboe vs. SPACE |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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