Correlation Between Stepstone and Home Depot
Can any of the company-specific risk be diversified away by investing in both Stepstone 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 Stepstone and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and Home Depot, you can compare the effects of market volatilities on Stepstone 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 Stepstone with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Home Depot.
Diversification Opportunities for Stepstone and Home Depot
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stepstone and Home is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Stepstone 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 Stepstone Group 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 Stepstone i.e., Stepstone and Home Depot go up and down completely randomly.
Pair Corralation between Stepstone and Home Depot
Given the investment horizon of 90 days Stepstone Group is expected to under-perform the Home Depot. In addition to that, Stepstone is 1.56 times more volatile than Home Depot. It trades about -0.18 of its total potential returns per unit of risk. Home Depot is currently generating about -0.25 per unit of volatility. If you would invest 41,883 in Home Depot on November 29, 2024 and sell it today you would lose (2,835) from holding Home Depot or give up 6.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepstone Group vs. Home Depot
Performance |
| Timeline |
| Stepstone Group |
| Home Depot |
Stepstone and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and Home Depot
The main advantage of trading using opposite Stepstone and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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.| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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