Correlation Between Home Depot and SentinelOne

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

Diversification Opportunities for Home Depot and SentinelOne

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between Home and SentinelOne is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and SentinelOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SentinelOne 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 SentinelOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SentinelOne has no effect on the direction of Home Depot i.e., Home Depot and SentinelOne go up and down completely randomly.

Pair Corralation between Home Depot and SentinelOne

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.83 times less return on investment than SentinelOne. But when comparing it to its historical volatility, Home Depot is 3.46 times less risky than SentinelOne. It trades about 0.1 of its potential returns per unit of risk. SentinelOne is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,647  in SentinelOne on December 29, 2023 and sell it today you would earn a total of  621.00  from holding SentinelOne or generate 37.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  SentinelOne

 Performance 
       Timeline  
Home Depot 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in April 2024.
SentinelOne 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Home Depot and SentinelOne Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and SentinelOne

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

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