Correlation Between Caseys General and Home Depot
Can any of the company-specific risk be diversified away by investing in both Caseys General 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 Caseys General and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caseys General Stores and Home Depot, you can compare the effects of market volatilities on Caseys General 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 Caseys General with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and Home Depot.
Diversification Opportunities for Caseys General and Home Depot
0.75 | Correlation Coefficient |
Poor diversification
The 1 month correlation between Caseys and Home is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Caseys General 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 Caseys General Stores 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 Caseys General i.e., Caseys General and Home Depot go up and down completely randomly.
Pair Corralation between Caseys General and Home Depot
Given the investment horizon of 90 days Caseys General Stores is expected to generate 1.23 times more return on investment than Home Depot. However, Caseys General is 1.23 times more volatile than Home Depot. It trades about 0.16 of its potential returns per unit of risk. Home Depot is currently generating about -0.07 per unit of risk. If you would invest 27,502 in Caseys General Stores on January 26, 2024 and sell it today you would earn a total of 4,062 from holding Caseys General Stores or generate 14.77% return on investment over 90 days.
Time Period | 1 Month [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Caseys General Stores vs. Home Depot
Performance |
Timeline |
Caseys General Stores |
Home Depot |
Caseys General and Home Depot Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Caseys General and Home Depot
The main advantage of trading using opposite Caseys General and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caseys General 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.Caseys General vs. LesliesInc | Caseys General vs. Sally Beauty Holdings | Caseys General vs. ODP Corp | Caseys General vs. 1 800 FLOWERSCOM |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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