Correlation Between Home Depot and Video River

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

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

Diversification Opportunities for Home Depot and Video River

-0.67

Correlation Coefficient

Home Depot  Video River

Excellent diversification

The 3 months correlation between Home and Video is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Video River Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Video River Networks 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 Video River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Video River Networks has no effect on the direction of Home Depot i.e., Home Depot and Video River go up and down completely randomly.

Pair Corralation between Home Depot and Video River

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.07 times more return on investment than Video River. However, Home Depot is 13.81 times less risky than Video River. It trades about 0.29 of its potential returns per unit of risk. Video River Networks is currently generating about -0.06 per unit of risk. If you would invest  39,350  in Home Depot on September 3, 2024 and sell it today you would earn a total of  3,563  from holding Home Depot or generate 9.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Home Depot  vs.  Video River Networks

Home Depot

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.

Video River Networks

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Video River Networks are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical indicators, Video River disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Depot and Video River

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

The idea behind Home Depot and Video River Networks 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.