Correlation Between Home Depot and Invitation Homes
Can any of the company-specific risk be diversified away by investing in both Home Depot and Invitation Homes 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 Invitation Homes 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 Invitation Homes, you can compare the effects of market volatilities on Home Depot and Invitation Homes 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 Invitation Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Invitation Homes.
Diversification Opportunities for Home Depot and Invitation Homes
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and Invitation is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes 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 Invitation Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invitation Homes has no effect on the direction of Home Depot i.e., Home Depot and Invitation Homes go up and down completely randomly.
Pair Corralation between Home Depot and Invitation Homes
Assuming the 90 days trading horizon The Home Depot is expected to under-perform the Invitation Homes. In addition to that, Home Depot is 1.79 times more volatile than Invitation Homes. It trades about -0.24 of its total potential returns per unit of risk. Invitation Homes is currently generating about -0.24 per unit of volatility. If you would invest 4,000 in Invitation Homes on October 11, 2024 and sell it today you would lose (111.00) from holding Invitation Homes or give up 2.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 66.67% |
| Values | Daily Returns |
The Home Depot vs. Invitation Homes
Performance |
| Timeline |
| Home Depot |
| Invitation Homes |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Home Depot and Invitation Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Invitation Homes
The main advantage of trading using opposite Home Depot and Invitation Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Invitation Homes 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 Invitation Homes will offset losses from the drop in Invitation Homes' long position.| Home Depot vs. Prudential Financial | Home Depot vs. salesforce inc | Home Depot vs. LPL Financial Holdings | Home Depot vs. Discover Financial Services |
| Invitation Homes vs. Check Point Software | Invitation Homes vs. Monster Beverage | Invitation Homes vs. Iron Mountain Incorporated | Invitation Homes vs. Unity Software |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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