Correlation Between Home Depot and Chicken Soup

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Can any of the company-specific risk be diversified away by investing in both Home Depot and Chicken Soup 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 Chicken Soup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Chicken Soup For, you can compare the effects of market volatilities on Home Depot and Chicken Soup 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 Chicken Soup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Chicken Soup.

Diversification Opportunities for Home Depot and Chicken Soup

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Home and Chicken is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Chicken Soup For in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicken Soup For 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 Chicken Soup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicken Soup For has no effect on the direction of Home Depot i.e., Home Depot and Chicken Soup go up and down completely randomly.

Pair Corralation between Home Depot and Chicken Soup

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.12 times more return on investment than Chicken Soup. However, Home Depot is 8.66 times less risky than Chicken Soup. It trades about 0.09 of its potential returns per unit of risk. Chicken Soup For is currently generating about -0.1 per unit of risk. If you would invest  37,537  in Home Depot on December 30, 2023 and sell it today you would earn a total of  823.00  from holding Home Depot or generate 2.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  Chicken Soup For

 Performance 
       Timeline  
Home Depot 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Chicken Soup For 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Weak
Over the last 90 days Chicken Soup For has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Home Depot and Chicken Soup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and Chicken Soup

The main advantage of trading using opposite Home Depot and Chicken Soup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Chicken Soup 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 Chicken Soup will offset losses from the drop in Chicken Soup's long position.
The idea behind Home Depot and Chicken Soup For 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.
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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