Correlation Between IShares Core and Home Depot
Can any of the company-specific risk be diversified away by investing in both IShares Core 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 IShares Core and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core REIT and Home Depot, you can compare the effects of market volatilities on IShares Core 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 IShares Core with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Home Depot.
Diversification Opportunities for IShares Core and Home Depot
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Home is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core REIT and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and IShares Core 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 iShares Core REIT 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 IShares Core i.e., IShares Core and Home Depot go up and down completely randomly.
Pair Corralation between IShares Core and Home Depot
Given the investment horizon of 90 days iShares Core REIT is expected to generate 1.07 times more return on investment than Home Depot. However, IShares Core is 1.07 times more volatile than Home Depot. It trades about -0.08 of its potential returns per unit of risk. Home Depot is currently generating about -0.47 per unit of risk. If you would invest 5,197 in iShares Core REIT on January 26, 2024 and sell it today you would lose (138.00) from holding iShares Core REIT or give up 2.66% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Core REIT vs. Home Depot
Performance |
Timeline |
iShares Core REIT |
Home Depot |
IShares Core and Home Depot Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Core and Home Depot
The main advantage of trading using opposite IShares Core and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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.IShares Core vs. Vanguard FTSE Emerging | IShares Core vs. Vanguard High Dividend | IShares Core vs. Vanguard Total Stock | IShares Core vs. Vanguard Total Bond |
Home Depot vs. Aquagold International | Home Depot vs. Thrivent High Yield | Home Depot vs. Morningstar Unconstrained Allocation | Home Depot vs. Via Renewables |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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