Correlation Between Home Depot and Franklin Libertyshares

Can any of the company-specific risk be diversified away by investing in both Home Depot and Franklin Libertyshares 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 Franklin Libertyshares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Depot and Franklin Libertyshares ICAV, you can compare the effects of market volatilities on Home Depot and Franklin Libertyshares 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 Franklin Libertyshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Franklin Libertyshares.

Diversification Opportunities for Home Depot and Franklin Libertyshares

-0.26

Correlation Coefficient

Home Depot  Franklin Libertyshares

Very good diversification

The 3 months correlation between Home and Franklin is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Franklin Libertyshares ICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Libertyshares 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 Franklin Libertyshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Libertyshares has no effect on the direction of Home Depot i.e., Home Depot and Franklin Libertyshares go up and down completely randomly.

Pair Corralation between Home Depot and Franklin Libertyshares

Assuming the 90 days trading horizon Home Depot is expected to generate 2.34 times less return on investment than Franklin Libertyshares. But when comparing it to its historical volatility, Home Depot is 6.15 times less risky than Franklin Libertyshares. It trades about 0.13 of its potential returns per unit of risk. Franklin Libertyshares ICAV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,772  in Franklin Libertyshares ICAV on September 12, 2024 and sell it today you would earn a total of  77.00  from holding Franklin Libertyshares ICAV or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Home Depot  vs.  Franklin Libertyshares ICAV

Home Depot

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Home Depot is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Franklin Libertyshares

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Libertyshares ICAV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Franklin Libertyshares is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Home Depot and Franklin Libertyshares

The main advantage of trading using opposite Home Depot and Franklin Libertyshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Franklin Libertyshares 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 Franklin Libertyshares will offset losses from the drop in Franklin Libertyshares' long position.

The idea behind Home Depot and Franklin Libertyshares ICAV 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.