Correlation Between Tower Semiconductor and Home Depot
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor and Home Depot 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 Tower Semiconductor and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and Home Depot, you can compare the effects of market volatilities on Tower Semiconductor and Home Depot 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 Tower Semiconductor with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and Home Depot.
Diversification Opportunities for Tower Semiconductor and Home Depot
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tower and Home is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Tower Semiconductor 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 Tower Semiconductor are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and Home Depot go up and down completely randomly.
Pair Corralation between Tower Semiconductor and Home Depot
Assuming the 90 days trading horizon Tower Semiconductor is expected to generate 1.96 times more return on investment than Home Depot. However, Tower Semiconductor is 1.96 times more volatile than Home Depot. It trades about 0.04 of its potential returns per unit of risk. Home Depot is currently generating about -0.08 per unit of risk. If you would invest 1,148,000 in Tower Semiconductor on January 20, 2024 and sell it today you would earn a total of 43,000 from holding Tower Semiconductor or generate 3.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 83.87% |
| Values | Daily Returns |
Tower Semiconductor vs. Home Depot
Performance |
| Timeline |
| Tower Semiconductor |
| Home Depot |
Tower Semiconductor and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Semiconductor and Home Depot
The main advantage of trading using opposite Tower Semiconductor and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Tower Semiconductor vs. Automatic Bank Services | Tower Semiconductor vs. EN Shoham Business | Tower Semiconductor vs. Rapac Communication Infrastructure | Tower Semiconductor vs. Tadiran Hldg |
| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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