Correlation Between Rockfire Resources and Home Depot
Can any of the company-specific risk be diversified away by investing in both Rockfire Resources 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 Rockfire Resources and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rockfire Resources plc and Home Depot, you can compare the effects of market volatilities on Rockfire Resources 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 Rockfire Resources with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rockfire Resources and Home Depot.
Diversification Opportunities for Rockfire Resources and Home Depot
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rockfire and Home is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Rockfire Resources plc and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Rockfire Resources 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 Rockfire Resources plc 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 Rockfire Resources i.e., Rockfire Resources and Home Depot go up and down completely randomly.
Pair Corralation between Rockfire Resources and Home Depot
Assuming the 90 days trading horizon Rockfire Resources plc is expected to under-perform the Home Depot. In addition to that, Rockfire Resources is 22.9 times more volatile than Home Depot. It trades about -0.03 of its total potential returns per unit of risk. Home Depot is currently generating about 0.08 per unit of volatility. If you would invest 16,579 in Home Depot on September 2, 2024 and sell it today you would earn a total of 1,278 from holding Home Depot or generate 7.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.08% |
| Values | Daily Returns |
Rockfire Resources plc vs. Home Depot
Performance |
| Timeline |
| Rockfire Resources plc |
| Home Depot |
Rockfire Resources and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rockfire Resources and Home Depot
The main advantage of trading using opposite Rockfire Resources and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockfire Resources 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.| Rockfire Resources vs. Ryanair Holdings plc | Rockfire Resources vs. Ecclesiastical Insurance Office | Rockfire Resources vs. Playtech Plc | Rockfire Resources vs. Flow Traders NV |
| Home Depot vs. Livermore Investments Group | Home Depot vs. Extra Space Storage | Home Depot vs. TR Property Investment | Home Depot vs. Axway Software SA |
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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