diversifiable risk of combining Home Depot and Zillow Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Zillow Group Class, you can compare the effects of market volatilities on Home Depot and Zillow Group 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 Zillow Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Zillow Group.
Diversification Opportunities for Home Depot and Zillow Group
Pair Corralation between Home Depot and Zillow Group
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.35 times more return on investment than Zillow Group. However, Home Depot is 2.87 times less risky than Zillow Group. It trades about 0.19 of its potential returns per unit of risk. Zillow Group Class is currently generating about -0.02 per unit of risk. If you would invest 35,078 in Home Depot on November 24, 2023 and sell it today you would earn a total of 1,335 from holding Home Depot or generate 3.81% return on investment over 90 days.
Home Depot vs. Zillow Group Class
Home Depot and Zillow Group Volatility Contrast
Pair Trading with Home Depot and Zillow GroupThe main advantage of trading using opposite Home Depot and Zillow Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Zillow Group 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 Zillow Group will offset losses from the drop in Zillow Group's long position. The idea behind Home Depot and Zillow Group Class 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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