Correlation Between Home Depot and Healthcare Realty

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

Diversification Opportunities for Home Depot and Healthcare Realty

  Correlation Coefficient

Very good diversification

The 3 months correlation between Home and Healthcare is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Healthcare Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Realty Trust 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 Healthcare Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Realty Trust has no effect on the direction of Home Depot i.e., Home Depot and Healthcare Realty go up and down completely randomly.

Pair Corralation between Home Depot and Healthcare Realty

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.38 times more return on investment than Healthcare Realty. However, Home Depot is 2.63 times less risky than Healthcare Realty. It trades about 0.36 of its potential returns per unit of risk. Healthcare Realty Trust is currently generating about -0.31 per unit of risk. If you would invest  36,007  in Home Depot on December 3, 2023 and sell it today you would earn a total of  2,438  from holding Home Depot or generate 6.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

Home Depot  vs.  Healthcare Realty Trust

Home Depot 

Risk-Adjusted Performance

20 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.
Healthcare Realty Trust 

Risk-Adjusted Performance

0 of 100

Very Weak
Over the last 90 days Healthcare Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Home Depot and Healthcare Realty Volatility Contrast

   Predicted Return Density   

Pair Trading with Home Depot and Healthcare Realty

The main advantage of trading using opposite Home Depot and Healthcare Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Healthcare Realty 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 Healthcare Realty will offset losses from the drop in Healthcare Realty's long position.
The idea behind Home Depot and Healthcare Realty Trust 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.
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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