Correlation Between Home Depot and IDEXX Laboratories
Can any of the company-specific risk be diversified away by investing in both Home Depot and IDEXX Laboratories 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 IDEXX Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and IDEXX Laboratories, you can compare the effects of market volatilities on Home Depot and IDEXX Laboratories 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 IDEXX Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and IDEXX Laboratories.
Diversification Opportunities for Home Depot and IDEXX Laboratories
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and IDEXX is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories 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 IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of Home Depot i.e., Home Depot and IDEXX Laboratories go up and down completely randomly.
Pair Corralation between Home Depot and IDEXX Laboratories
Assuming the 90 days trading horizon Home Depot is expected to generate 0.19 times more return on investment than IDEXX Laboratories. However, Home Depot is 5.33 times less risky than IDEXX Laboratories. It trades about 0.07 of its potential returns per unit of risk. IDEXX Laboratories is currently generating about -0.02 per unit of risk. If you would invest 17,190 in Home Depot on September 18, 2024 and sell it today you would earn a total of 667.00 from holding Home Depot or generate 3.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 97.65% |
Values | Daily Returns |
Home Depot vs. IDEXX Laboratories
Performance |
Timeline |
Home Depot |
IDEXX Laboratories |
Home Depot and IDEXX Laboratories Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and IDEXX Laboratories
The main advantage of trading using opposite Home Depot and IDEXX Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, IDEXX Laboratories 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 IDEXX Laboratories will offset losses from the drop in IDEXX Laboratories' long position.Home Depot vs. Toyota Motor Corp | Home Depot vs. SoftBank Group Corp | Home Depot vs. OTP Bank Nyrt | Home Depot vs. Hershey Co |
IDEXX Laboratories vs. Samsung Electronics Co | IDEXX Laboratories vs. Samsung Electronics Co | IDEXX Laboratories vs. Hyundai Motor | IDEXX Laboratories vs. Reliance Industries Ltd |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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