Correlation Between Home Depot and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Home Depot and Fast Retailing 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 Fast Retailing 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 Fast Retailing Co, you can compare the effects of market volatilities on Home Depot and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Fast Retailing.
Diversification Opportunities for Home Depot and Fast Retailing
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Fast is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Home Depot i.e., Home Depot and Fast Retailing go up and down completely randomly.
Pair Corralation between Home Depot and Fast Retailing
Assuming the 90 days trading horizon The Home Depot is expected to generate 0.59 times more return on investment than Fast Retailing. However, The Home Depot is 1.69 times less risky than Fast Retailing. It trades about 0.2 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.26 per unit of risk. If you would invest 37,790 in The Home Depot on October 25, 2024 and sell it today you would earn a total of 1,745 from holding The Home Depot or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. Fast Retailing Co
Performance |
| Timeline |
| Home Depot |
| Fast Retailing |
Home Depot and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Fast Retailing
The main advantage of trading using opposite Home Depot and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing'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 |
| Fast Retailing vs. Ribbon Communications | Fast Retailing vs. Iridium Communications | Fast Retailing vs. Citic Telecom International | Fast Retailing vs. Highlight Communications AG |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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