Correlation Between Home Depot and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Home Depot and Fevertree Drinks 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 Fevertree Drinks 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 Fevertree Drinks PLC, you can compare the effects of market volatilities on Home Depot and Fevertree Drinks 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 Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Fevertree Drinks.
Diversification Opportunities for Home Depot and Fevertree Drinks
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and Fevertree is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Fevertree Drinks PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks PLC 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks PLC has no effect on the direction of Home Depot i.e., Home Depot and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Home Depot and Fevertree Drinks
Assuming the 90 days trading horizon Home Depot is expected to generate 4.07 times less return on investment than Fevertree Drinks. But when comparing it to its historical volatility, The Home Depot is 4.41 times less risky than Fevertree Drinks. It trades about 0.22 of its potential returns per unit of risk. Fevertree Drinks PLC is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 775.00 in Fevertree Drinks PLC on November 5, 2024 and sell it today you would earn a total of 165.00 from holding Fevertree Drinks PLC or generate 21.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. Fevertree Drinks PLC
Performance |
| Timeline |
| Home Depot |
| Fevertree Drinks PLC |
Home Depot and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Fevertree Drinks
The main advantage of trading using opposite Home Depot and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.| Home Depot vs. Bio Techne Corp | Home Depot vs. Playtech plc | Home Depot vs. UNIVMUSIC GRPADR050 | Home Depot vs. Easy Software AG |
| Fevertree Drinks vs. CVS Health | Fevertree Drinks vs. Monument Mining Limited | Fevertree Drinks vs. Planet Fitness | Fevertree Drinks vs. WESANA HEALTH HOLD |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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