Correlation Between Home Depot and Meta Materials
Can any of the company-specific risk be diversified away by investing in both Home Depot and Meta Materials 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 Meta Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Meta Materials, you can compare the effects of market volatilities on Home Depot and Meta Materials 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 Meta Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Meta Materials.
Diversification Opportunities for Home Depot and Meta Materials
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Meta is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Meta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Materials 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 Meta Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Materials has no effect on the direction of Home Depot i.e., Home Depot and Meta Materials go up and down completely randomly.
Pair Corralation between Home Depot and Meta Materials
Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Meta Materials. But the stock apears to be less risky and, when comparing its historical volatility, Home Depot is 9.04 times less risky than Meta Materials. The stock trades about -0.42 of its potential returns per unit of risk. The Meta Materials is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 197.00 in Meta Materials on January 20, 2024 and sell it today you would earn a total of 65.00 from holding Meta Materials or generate 32.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Home Depot vs. Meta Materials
Performance |
Timeline |
Home Depot |
Meta Materials |
Home Depot and Meta Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and Meta Materials
The main advantage of trading using opposite Home Depot and Meta Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Meta Materials 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 Meta Materials will offset losses from the drop in Meta Materials' long position.Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Live Ventures |
Meta Materials vs. Cps Technologies | Meta Materials vs. Kopin | Meta Materials vs. Wallbox NV | Meta Materials vs. Corning Incorporated |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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