Correlation Between Home Depot and ProShares Short

Can any of the company-specific risk be diversified away by investing in both Home Depot and ProShares Short 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 Home Depot and ProShares Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Depot and ProShares Short SP500, you can compare the effects of market volatilities on Home Depot and ProShares Short 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 Home Depot with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and ProShares Short.

Diversification Opportunities for Home Depot and ProShares Short

-0.42

Correlation Coefficient

Home Depot  ProShares Short

Very good diversification

The 3 months correlation between Home and ProShares is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ProShares Short SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short SP500 and Home Depot 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 Home Depot are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short SP500 has no effect on the direction of Home Depot i.e., Home Depot and ProShares Short go up and down completely randomly.

Pair Corralation between Home Depot and ProShares Short

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.57 times more return on investment than ProShares Short. However, Home Depot is 1.57 times more volatile than ProShares Short SP500. It trades about 0.06 of its potential returns per unit of risk. ProShares Short SP500 is currently generating about -0.18 per unit of risk. If you would invest  35,950  in Home Depot on May 5, 2025 and sell it today you would earn a total of  1,416  from holding Home Depot or generate 3.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Home Depot  vs.  ProShares Short SP500

Home Depot

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares Short SP500

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Short SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Home Depot and ProShares Short

The main advantage of trading using opposite Home Depot and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, ProShares Short 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 ProShares Short will offset losses from the drop in ProShares Short's long position.

The idea behind Home Depot and ProShares Short SP500 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.

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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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.