Correlation Between Columbus and Home Depot
Can any of the company-specific risk be diversified away by investing in both Columbus 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 Columbus and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbus AS and Home Depot, you can compare the effects of market volatilities on Columbus 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 Columbus with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbus and Home Depot.
Diversification Opportunities for Columbus and Home Depot
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Columbus and Home is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Columbus AS and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Columbus 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 Columbus AS 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 Columbus i.e., Columbus and Home Depot go up and down completely randomly.
Pair Corralation between Columbus and Home Depot
Assuming the 90 days trading horizon Columbus AS is expected to generate 1.05 times more return on investment than Home Depot. However, Columbus is 1.05 times more volatile than Home Depot. It trades about 0.52 of its potential returns per unit of risk. Home Depot is currently generating about -0.42 per unit of risk. If you would invest 800.00 in Columbus AS on January 20, 2024 and sell it today you would earn a total of 134.00 from holding Columbus AS or generate 16.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Columbus AS vs. Home Depot
Performance |
| Timeline |
| Columbus AS |
| Home Depot |
Columbus and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Columbus and Home Depot
The main advantage of trading using opposite Columbus and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbus 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 Columbus AS 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.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Live Ventures |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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