Correlation Between Xtrackers California and Home Depot

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Xtrackers California 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 Xtrackers California and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers California Municipal and Home Depot, you can compare the effects of market volatilities on Xtrackers California 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 Xtrackers California with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers California and Home Depot.

Diversification Opportunities for Xtrackers California and Home Depot

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Xtrackers and Home is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers California Municipal and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Xtrackers California 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 Xtrackers California Municipal 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 Xtrackers California i.e., Xtrackers California and Home Depot go up and down completely randomly.

Pair Corralation between Xtrackers California and Home Depot

Allowing for the 90-day total investment horizon Xtrackers California is expected to generate 22.62 times less return on investment than Home Depot. But when comparing it to its historical volatility, Xtrackers California Municipal is 10.64 times less risky than Home Depot. It trades about 0.05 of its potential returns per unit of risk. Home Depot is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  37,333  in Home Depot on December 29, 2023 and sell it today you would earn a total of  1,027  from holding Home Depot or generate 2.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Xtrackers California Municipal  vs.  Home Depot

 Performance 
       Timeline  
Xtrackers California 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Xtrackers California Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xtrackers California is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Home Depot 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Xtrackers California and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xtrackers California and Home Depot

The main advantage of trading using opposite Xtrackers California and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers California 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 Xtrackers California Municipal and 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.
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

Other Complementary Tools

Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Share Portfolio
Track or share privately all of your investments from the convenience of any device
Risk-Return Analysis
View associations between returns expected from investment and the risk you assume
AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Transaction History
View history of all your transactions and understand their impact on performance
Equity Valuation
Check real value of public entities based on technical and fundamental data