Correlation Between National Bank and HOME DEPOT
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and HOME DEPOT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank of and HOME DEPOT CDR, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and HOME DEPOT.
Diversification Opportunities for National Bank and HOME DEPOT
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and HOME is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and HOME DEPOT CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT CDR and National Bank 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 National Bank of 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 CDR has no effect on the direction of National Bank i.e., National Bank and HOME DEPOT go up and down completely randomly.
Pair Corralation between National Bank and HOME DEPOT
Assuming the 90 days trading horizon National Bank of is expected to generate 0.64 times more return on investment than HOME DEPOT. However, National Bank of is 1.57 times less risky than HOME DEPOT. It trades about 0.12 of its potential returns per unit of risk. HOME DEPOT CDR is currently generating about 0.05 per unit of risk. If you would invest 1,549 in National Bank of on August 26, 2024 and sell it today you would earn a total of 943.00 from holding National Bank of or generate 60.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank of vs. HOME DEPOT CDR
Performance |
| Timeline |
| National Bank |
| HOME DEPOT CDR |
National Bank and HOME DEPOT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and HOME DEPOT
The main advantage of trading using opposite National Bank and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. HOME DEPOT CDR | National Bank vs. Canso Credit Trust | National Bank vs. Wilmington Capital Management | National Bank vs. Verizon Communications CDR |
| HOME DEPOT vs. Walmart Inc CDR | HOME DEPOT vs. Amazon CDR | HOME DEPOT vs. UPS CDR | HOME DEPOT vs. UnitedHealth Group CDR |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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