Correlation Between Home Depot and FTI Consulting
Can any of the company-specific risk be diversified away by investing in both Home Depot and FTI Consulting 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 FTI Consulting into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and FTI Consulting, you can compare the effects of market volatilities on Home Depot and FTI Consulting 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 FTI Consulting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and FTI Consulting.
Diversification Opportunities for Home Depot and FTI Consulting
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and FTI is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and FTI Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTI Consulting 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 FTI Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTI Consulting has no effect on the direction of Home Depot i.e., Home Depot and FTI Consulting go up and down completely randomly.
Pair Corralation between Home Depot and FTI Consulting
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.97 times more return on investment than FTI Consulting. However, Home Depot is 1.03 times less risky than FTI Consulting. It trades about 0.09 of its potential returns per unit of risk. FTI Consulting is currently generating about -0.07 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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Home Depot vs. FTI Consulting
Performance |
Timeline |
Home Depot |
FTI Consulting |
Home Depot and FTI Consulting Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and FTI Consulting
The main advantage of trading using opposite Home Depot and FTI Consulting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, FTI Consulting 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 FTI Consulting will offset losses from the drop in FTI Consulting's long position.Home Depot vs. Procter Gamble | Home Depot vs. McDonalds | Home Depot vs. Dupont De Nemours | Home Depot vs. Verizon Communications |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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