Correlation Between Home Depot and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both Home Depot and LPKF Laser 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 LPKF Laser 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 LPKF Laser Electronics, you can compare the effects of market volatilities on Home Depot and LPKF Laser 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 LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and LPKF Laser.
Diversification Opportunities for Home Depot and LPKF Laser
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and LPKF is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics 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 LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of Home Depot i.e., Home Depot and LPKF Laser go up and down completely randomly.
Pair Corralation between Home Depot and LPKF Laser
Assuming the 90 days trading horizon Home Depot is expected to generate 2.19 times less return on investment than LPKF Laser. But when comparing it to its historical volatility, The Home Depot is 1.34 times less risky than LPKF Laser. It trades about 0.06 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 872.00 in LPKF Laser Electronics on October 19, 2024 and sell it today you would earn a total of 25.00 from holding LPKF Laser Electronics or generate 2.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
The Home Depot vs. LPKF Laser Electronics
Performance |
| Timeline |
| Home Depot |
| LPKF Laser Electronics |
Home Depot and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and LPKF Laser
The main advantage of trading using opposite Home Depot and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, LPKF Laser 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 LPKF Laser will offset losses from the drop in LPKF Laser's long position.| Home Depot vs. IDP EDUCATION LTD | Home Depot vs. Soken Chemical Engineering | Home Depot vs. SEKISUI CHEMICAL | Home Depot vs. Sanyo Chemical Industries |
| LPKF Laser vs. The Home Depot | LPKF Laser vs. DFS Furniture PLC | LPKF Laser vs. Xenia Hotels Resorts | LPKF Laser vs. KENEDIX OFFICE INV |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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