Correlation Between Income Financial and HOME DEPOT

Can any of the company-specific risk be diversified away by investing in both Income Financial 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 Income Financial and HOME DEPOT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Income Financial Trust and HOME DEPOT CDR, you can compare the effects of market volatilities on Income Financial 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 Income Financial with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Financial and HOME DEPOT.

Diversification Opportunities for Income Financial and HOME DEPOT

0.45

Correlation Coefficient

Income Financial  HOME DEPOT

Very weak diversification

The 3 months correlation between Income and HOME is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Income Financial Trust and HOME DEPOT CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT CDR and Income Financial 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 Income Financial Trust 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 CDR has no effect on the direction of Income Financial i.e., Income Financial and HOME DEPOT go up and down completely randomly.

Pair Corralation between Income Financial and HOME DEPOT

Assuming the 90 days trading horizon Income Financial Trust is expected to generate 0.92 times more return on investment than HOME DEPOT. However, Income Financial Trust is 1.09 times less risky than HOME DEPOT. It trades about -0.16 of its potential returns per unit of risk. HOME DEPOT CDR is currently generating about -0.3 per unit of risk. If you would invest  893.00  in Income Financial Trust on September 27, 2024 and sell it today you would lose (37.00) from holding Income Financial Trust or give up 4.14% of portfolio value over 90 days.

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

Income Financial Trust  vs.  HOME DEPOT CDR

Income Financial Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Income Financial Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Income Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HOME DEPOT CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HOME DEPOT CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, HOME DEPOT is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Income Financial and HOME DEPOT

The main advantage of trading using opposite Income Financial and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Financial 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.

The idea behind Income Financial Trust and HOME DEPOT CDR 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.