Correlation Between Home Depot and Daily Journal
Can any of the company-specific risk be diversified away by investing in both Home Depot and Daily Journal 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 Daily Journal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Daily Journal Corp, you can compare the effects of market volatilities on Home Depot and Daily Journal 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 Daily Journal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Daily Journal.
Diversification Opportunities for Home Depot and Daily Journal
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Daily is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Daily Journal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daily Journal Corp 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 Daily Journal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daily Journal Corp has no effect on the direction of Home Depot i.e., Home Depot and Daily Journal go up and down completely randomly.
Pair Corralation between Home Depot and Daily Journal
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.2 times less return on investment than Daily Journal. But when comparing it to its historical volatility, Home Depot is 1.43 times less risky than Daily Journal. It trades about 0.04 of its potential returns per unit of risk. Daily Journal Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 25,740 in Daily Journal Corp on January 19, 2024 and sell it today you would earn a total of 7,782 from holding Daily Journal Corp or generate 30.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Daily Journal Corp
Performance |
| Timeline |
| Home Depot |
| Daily Journal Corp |
Home Depot and Daily Journal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Daily Journal
The main advantage of trading using opposite Home Depot and Daily Journal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Daily Journal 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 Daily Journal will offset losses from the drop in Daily Journal's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. LL Flooring Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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