Correlation Between Ping An and Home Depot
Can any of the company-specific risk be diversified away by investing in both Ping An 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 Ping An and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ping An Insurance and The Home Depot, you can compare the effects of market volatilities on Ping An 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 Ping An with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Home Depot.
Diversification Opportunities for Ping An and Home Depot
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ping and Home is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Ping An 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 Ping An Insurance 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 Ping An i.e., Ping An and Home Depot go up and down completely randomly.
Pair Corralation between Ping An and Home Depot
Assuming the 90 days trading horizon Ping An Insurance is expected to generate 4.21 times more return on investment than Home Depot. However, Ping An is 4.21 times more volatile than The Home Depot. It trades about 0.14 of its potential returns per unit of risk. The Home Depot is currently generating about 0.18 per unit of risk. If you would invest 242.00 in Ping An Insurance on August 29, 2024 and sell it today you would earn a total of 299.00 from holding Ping An Insurance or generate 123.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ping An Insurance vs. The Home Depot
Performance |
| Timeline |
| Ping An Insurance |
| Home Depot |
Ping An and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ping An and Home Depot
The main advantage of trading using opposite Ping An and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ping An 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.The idea behind Ping An Insurance and The Home Depot pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Home Depot vs. Superior Plus Corp | Home Depot vs. NMI Holdings | Home Depot vs. Origin Agritech | Home Depot vs. SIVERS SEMICONDUCTORS AB |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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