Correlation Between North American and HOME DEPOT
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and HOME DEPOT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and HOME DEPOT CDR, you can compare the effects of market volatilities on North American 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 North American with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and HOME DEPOT.
Diversification Opportunities for North American and HOME DEPOT
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between North and HOME is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction 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 North American 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 North American Construction 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 North American i.e., North American and HOME DEPOT go up and down completely randomly.
Pair Corralation between North American and HOME DEPOT
Assuming the 90 days trading horizon North American is expected to generate 5.92 times less return on investment than HOME DEPOT. In addition to that, North American is 2.16 times more volatile than HOME DEPOT CDR. It trades about 0.02 of its total potential returns per unit of risk. HOME DEPOT CDR is currently generating about 0.28 per unit of volatility. If you would invest 2,482 in HOME DEPOT CDR on October 20, 2024 and sell it today you would earn a total of 154.00 from holding HOME DEPOT CDR or generate 6.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. HOME DEPOT CDR
Performance |
| Timeline |
| North American Const |
| HOME DEPOT CDR |
North American and HOME DEPOT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and HOME DEPOT
The main advantage of trading using opposite North American and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. PHX Energy Services | North American vs. CES Energy Solutions | North American vs. Total Energy Services | North American vs. Pason Systems |
| HOME DEPOT vs. National Bank of | HOME DEPOT vs. Bank of Nova | HOME DEPOT vs. Micron Technology, | HOME DEPOT vs. Jamieson Wellness |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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