Correlation Between Home Depot and Lupatech
Can any of the company-specific risk be diversified away by investing in both Home Depot and Lupatech 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 Lupatech 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 Lupatech SA, you can compare the effects of market volatilities on Home Depot and Lupatech 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 Lupatech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Lupatech.
Diversification Opportunities for Home Depot and Lupatech
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Lupatech is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Lupatech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lupatech 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 Lupatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lupatech SA has no effect on the direction of Home Depot i.e., Home Depot and Lupatech go up and down completely randomly.
Pair Corralation between Home Depot and Lupatech
Assuming the 90 days trading horizon The Home Depot is expected to generate 0.43 times more return on investment than Lupatech. However, The Home Depot is 2.34 times less risky than Lupatech. It trades about 0.06 of its potential returns per unit of risk. Lupatech SA is currently generating about -0.04 per unit of risk. If you would invest 6,101 in The Home Depot on September 3, 2024 and sell it today you would earn a total of 2,976 from holding The Home Depot or generate 48.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
The Home Depot vs. Lupatech SA
Performance |
| Timeline |
| Home Depot |
| Lupatech SA |
Home Depot and Lupatech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Lupatech
The main advantage of trading using opposite Home Depot and Lupatech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Lupatech 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 Lupatech will offset losses from the drop in Lupatech's long position.| Home Depot vs. Planet Fitness | Home Depot vs. Mitsubishi UFJ Financial | Home Depot vs. Credit Acceptance | Home Depot vs. Align Technology |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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