Correlation Between SPDR Portfolio and Home Depot
Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio 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 SPDR Portfolio and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Portfolio MSCI and Home Depot, you can compare the effects of market volatilities on SPDR Portfolio 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 SPDR Portfolio with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Home Depot.
Diversification Opportunities for SPDR Portfolio and Home Depot
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and Home is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio MSCI and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and SPDR Portfolio 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 SPDR Portfolio MSCI 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 SPDR Portfolio i.e., SPDR Portfolio and Home Depot go up and down completely randomly.
Pair Corralation between SPDR Portfolio and Home Depot
Given the investment horizon of 90 days SPDR Portfolio MSCI is expected to generate 0.42 times more return on investment than Home Depot. However, SPDR Portfolio MSCI is 2.38 times less risky than Home Depot. It trades about -0.18 of its potential returns per unit of risk. Home Depot is currently generating about -0.31 per unit of risk. If you would invest 5,863 in SPDR Portfolio MSCI on January 18, 2024 and sell it today you would lose (154.00) from holding SPDR Portfolio MSCI or give up 2.63% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
SPDR Portfolio MSCI vs. Home Depot
Performance |
Timeline |
SPDR Portfolio MSCI |
Home Depot |
SPDR Portfolio and Home Depot Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SPDR Portfolio and Home Depot
The main advantage of trading using opposite SPDR Portfolio and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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.SPDR Portfolio vs. VanEck Morningstar International | SPDR Portfolio vs. VanEck ETF Trust | SPDR Portfolio vs. AGFiQ Global Infrastructure | SPDR Portfolio vs. VanEck ETF Trust |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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