Correlation Between Home Depot and Fras Le
Can any of the company-specific risk be diversified away by investing in both Home Depot and Fras Le 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 Fras Le 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 Fras le SA, you can compare the effects of market volatilities on Home Depot and Fras Le 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 Fras Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Fras Le.
Diversification Opportunities for Home Depot and Fras Le
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Fras is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Fras le SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fras le SA 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 Fras Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fras le SA has no effect on the direction of Home Depot i.e., Home Depot and Fras Le go up and down completely randomly.
Pair Corralation between Home Depot and Fras Le
Assuming the 90 days trading horizon The Home Depot is expected to generate 1.11 times more return on investment than Fras Le. However, Home Depot is 1.11 times more volatile than Fras le SA. It trades about 0.12 of its potential returns per unit of risk. Fras le SA is currently generating about 0.09 per unit of risk. If you would invest 5,430 in The Home Depot on August 24, 2024 and sell it today you would earn a total of 3,052 from holding The Home Depot or generate 56.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. Fras le SA
Performance |
| Timeline |
| Home Depot |
| Fras le SA |
Home Depot and Fras Le Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Fras Le
The main advantage of trading using opposite Home Depot and Fras Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Fras Le 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 Fras Le will offset losses from the drop in Fras Le's long position.| Home Depot vs. Fras le SA | Home Depot vs. Clave Indices De | Home Depot vs. BTG Pactual Logstica | Home Depot vs. Telefonaktiebolaget LM Ericsson |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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