Correlation Between Litigation Capital and Home Depot
Can any of the company-specific risk be diversified away by investing in both Litigation Capital and Home Depot 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 Litigation Capital and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Litigation Capital Management and Home Depot, you can compare the effects of market volatilities on Litigation Capital and Home Depot 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 Litigation Capital with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litigation Capital and Home Depot.
Diversification Opportunities for Litigation Capital and Home Depot
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Litigation and Home is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Litigation Capital Management and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Litigation Capital 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 Litigation Capital Management are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Litigation Capital i.e., Litigation Capital and Home Depot go up and down completely randomly.
Pair Corralation between Litigation Capital and Home Depot
Assuming the 90 days trading horizon Litigation Capital Management is expected to generate 7.13 times more return on investment than Home Depot. However, Litigation Capital is 7.13 times more volatile than Home Depot. It trades about 0.04 of its potential returns per unit of risk. Home Depot is currently generating about 0.08 per unit of risk. If you would invest 9,727 in Litigation Capital Management on August 29, 2024 and sell it today you would earn a total of 1,848 from holding Litigation Capital Management or generate 19.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.63% |
| Values | Daily Returns |
Litigation Capital Management vs. Home Depot
Performance |
| Timeline |
| Litigation Capital |
| Home Depot |
Litigation Capital and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Litigation Capital and Home Depot
The main advantage of trading using opposite Litigation Capital and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Litigation Capital position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Litigation Capital vs. Toyota Motor Corp | Litigation Capital vs. Lendinvest PLC | Litigation Capital vs. Neometals | Litigation Capital vs. Coor Service Management |
| Home Depot vs. Ondine Biomedical | Home Depot vs. Europa Metals | Home Depot vs. Lendinvest PLC | Home Depot vs. Neometals |
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 Stocks Directory module to find actively traded stocks across global markets.
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