Correlation Between Home Depot and Jackpot Digital
Can any of the company-specific risk be diversified away by investing in both Home Depot and Jackpot Digital 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 Jackpot Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Jackpot Digital, you can compare the effects of market volatilities on Home Depot and Jackpot Digital 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 Jackpot Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Jackpot Digital.
Diversification Opportunities for Home Depot and Jackpot Digital
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Jackpot is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Jackpot Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jackpot Digital 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 Jackpot Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jackpot Digital has no effect on the direction of Home Depot i.e., Home Depot and Jackpot Digital go up and down completely randomly.
Pair Corralation between Home Depot and Jackpot Digital
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.97 times less return on investment than Jackpot Digital. But when comparing it to its historical volatility, Home Depot is 4.85 times less risky than Jackpot Digital. It trades about 0.06 of its potential returns per unit of risk. Jackpot Digital is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 6.06 in Jackpot Digital on September 6, 2024 and sell it today you would lose (1.36) from holding Jackpot Digital or give up 22.44% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 99.8% |
Values | Daily Returns |
Home Depot vs. Jackpot Digital
Performance |
Timeline |
Home Depot |
Jackpot Digital |
Home Depot and Jackpot Digital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and Jackpot Digital
The main advantage of trading using opposite Home Depot and Jackpot Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Jackpot Digital 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 Jackpot Digital will offset losses from the drop in Jackpot Digital's long position.Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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