Correlation Between Home Depot and LL Flooring
Can any of the company-specific risk be diversified away by investing in both Home Depot and LL Flooring 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 LL Flooring into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and LL Flooring Holdings, you can compare the effects of market volatilities on Home Depot and LL Flooring 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 LL Flooring. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and LL Flooring.
Diversification Opportunities for Home Depot and LL Flooring
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and LL Flooring is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and LL Flooring Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LL Flooring Holdings 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 LL Flooring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LL Flooring Holdings has no effect on the direction of Home Depot i.e., Home Depot and LL Flooring go up and down completely randomly.
Pair Corralation between Home Depot and LL Flooring
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.36 times more return on investment than LL Flooring. However, Home Depot is 2.74 times less risky than LL Flooring. It trades about 0.04 of its potential returns per unit of risk. LL Flooring Holdings is currently generating about -0.08 per unit of risk. If you would invest 27,099 in Home Depot on January 26, 2024 and sell it today you would earn a total of 6,202 from holding Home Depot or generate 22.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. LL Flooring Holdings
Performance |
| Timeline |
| Home Depot |
| LL Flooring Holdings |
Home Depot and LL Flooring Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and LL Flooring
The main advantage of trading using opposite Home Depot and LL Flooring positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, LL Flooring 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 LL Flooring will offset losses from the drop in LL Flooring'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 |
| LL Flooring vs. Haverty Furniture Companies | LL Flooring vs. Arhaus Inc | LL Flooring vs. Tile Shop Holdings | LL Flooring vs. Floor Decor Holdings |
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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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