Correlation Between Home Depot and Satcom Systems
Can any of the company-specific risk be diversified away by investing in both Home Depot and Satcom Systems 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 Satcom Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Satcom Systems, you can compare the effects of market volatilities on Home Depot and Satcom Systems 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 Satcom Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Satcom Systems.
Diversification Opportunities for Home Depot and Satcom Systems
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and Satcom is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Satcom Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satcom Systems 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 Satcom Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satcom Systems has no effect on the direction of Home Depot i.e., Home Depot and Satcom Systems go up and down completely randomly.
Pair Corralation between Home Depot and Satcom Systems
Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Satcom Systems. But the stock apears to be less risky and, when comparing its historical volatility, Home Depot is 1.76 times less risky than Satcom Systems. The stock trades about -0.46 of its potential returns per unit of risk. The Satcom Systems is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 6,220 in Satcom Systems on January 20, 2024 and sell it today you would earn a total of 380.00 from holding Satcom Systems or generate 6.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Home Depot vs. Satcom Systems
Performance |
| Timeline |
| Home Depot |
| Satcom Systems |
Home Depot and Satcom Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Satcom Systems
The main advantage of trading using opposite Home Depot and Satcom Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Satcom Systems 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 Satcom Systems will offset losses from the drop in Satcom Systems' long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Live Ventures |
| Satcom Systems vs. EN Shoham Business | Satcom Systems vs. Accel Solutions Group | Satcom Systems vs. SR Accord | Satcom Systems vs. Rapac Communication Infrastructure |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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