Correlation Between S-E BANKEN and Home Depot
Can any of the company-specific risk be diversified away by investing in both S-E BANKEN 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 S-E BANKEN and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between S E BANKEN A and The Home Depot, you can compare the effects of market volatilities on S-E BANKEN 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 S-E BANKEN with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of S-E BANKEN and Home Depot.
Diversification Opportunities for S-E BANKEN and Home Depot
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between S-E and Home is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding S E BANKEN A and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and S-E BANKEN 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 S E BANKEN A 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 S-E BANKEN i.e., S-E BANKEN and Home Depot go up and down completely randomly.
Pair Corralation between S-E BANKEN and Home Depot
Assuming the 90 days trading horizon S E BANKEN A is expected to generate 0.98 times more return on investment than Home Depot. However, S E BANKEN A is 1.02 times less risky than Home Depot. It trades about -0.13 of its potential returns per unit of risk. The Home Depot is currently generating about -0.42 per unit of risk. If you would invest 1,294 in S E BANKEN A on January 24, 2024 and sell it today you would lose (48.00) from holding S E BANKEN A or give up 3.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
S E BANKEN A vs. The Home Depot
Performance |
| Timeline |
| S E BANKEN |
| Home Depot |
S-E BANKEN and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S-E BANKEN and Home Depot
The main advantage of trading using opposite S-E BANKEN and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S-E BANKEN 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.| S-E BANKEN vs. MeVis Medical Solutions | S-E BANKEN vs. SK TELECOM TDADR | S-E BANKEN vs. DXC Technology Co | S-E BANKEN vs. Ribbon Communications |
| Home Depot vs. ALBIS LEASING AG | Home Depot vs. Nordic Semiconductor ASA | Home Depot vs. Corporate Office Properties | Home Depot vs. NXP Semiconductors NV |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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