Correlation Between Home Depot and INNOVATEC SPA
Can any of the company-specific risk be diversified away by investing in both Home Depot and INNOVATEC SPA 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 INNOVATEC SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Home Depot and INNOVATEC SPA, you can compare the effects of market volatilities on Home Depot and INNOVATEC SPA 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 INNOVATEC SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and INNOVATEC SPA.
Diversification Opportunities for Home Depot and INNOVATEC SPA
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and INNOVATEC is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and INNOVATEC SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INNOVATEC SPA 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 The Home Depot are associated (or correlated) with INNOVATEC SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INNOVATEC SPA has no effect on the direction of Home Depot i.e., Home Depot and INNOVATEC SPA go up and down completely randomly.
Pair Corralation between Home Depot and INNOVATEC SPA
Assuming the 90 days trading horizon The Home Depot is expected to generate 0.23 times more return on investment than INNOVATEC SPA. However, The Home Depot is 4.32 times less risky than INNOVATEC SPA. It trades about 0.06 of its potential returns per unit of risk. INNOVATEC SPA is currently generating about -0.03 per unit of risk. If you would invest 29,171 in The Home Depot on October 25, 2024 and sell it today you would earn a total of 10,364 from holding The Home Depot or generate 35.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
The Home Depot vs. INNOVATEC SPA
Performance |
| Timeline |
| Home Depot |
| INNOVATEC SPA |
Home Depot and INNOVATEC SPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and INNOVATEC SPA
The main advantage of trading using opposite Home Depot and INNOVATEC SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, INNOVATEC SPA 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 INNOVATEC SPA will offset losses from the drop in INNOVATEC SPA's long position.| Home Depot vs. Haverty Furniture Companies | Home Depot vs. Beazer Homes USA | Home Depot vs. Focus Home Interactive | Home Depot vs. Autohome ADR |
| INNOVATEC SPA vs. DICKER DATA LTD | INNOVATEC SPA vs. Synchrony Financial | INNOVATEC SPA vs. REVO INSURANCE SPA | INNOVATEC SPA vs. S E BANKEN A |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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