Correlation Between Home Depot and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Home Depot and Iridium Communications 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 Iridium Communications 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 Iridium Communications, you can compare the effects of market volatilities on Home Depot and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Iridium Communications.
Diversification Opportunities for Home Depot and Iridium Communications
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Home and Iridium is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Home Depot i.e., Home Depot and Iridium Communications go up and down completely randomly.
Pair Corralation between Home Depot and Iridium Communications
Assuming the 90 days trading horizon The Home Depot is expected to generate 0.51 times more return on investment than Iridium Communications. However, The Home Depot is 1.95 times less risky than Iridium Communications. It trades about 0.06 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.04 per unit of risk. If you would invest 27,166 in The Home Depot on October 11, 2024 and sell it today you would earn a total of 10,319 from holding The Home Depot or generate 37.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. Iridium Communications
Performance |
| Timeline |
| Home Depot |
| Iridium Communications |
Home Depot and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Iridium Communications
The main advantage of trading using opposite Home Depot and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| Home Depot vs. TT Electronics PLC | Home Depot vs. Motorcar Parts of | Home Depot vs. CarsalesCom | Home Depot vs. Nucletron Electronic Aktiengesellschaft |
| Iridium Communications vs. OFFICE DEPOT | Iridium Communications vs. Forsys Metals Corp | Iridium Communications vs. The Home Depot | Iridium Communications vs. Aedas Homes SA |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |