Correlation Between LandBridge Company and Home Depot

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

By analyzing existing cross correlation between LandBridge Company LLC and Home Depot, you can compare the effects of market volatilities on LandBridge Company 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 LandBridge Company with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of LandBridge Company and Home Depot.

Diversification Opportunities for LandBridge Company and Home Depot

0.47

Correlation Coefficient

LandBridge Company  Home Depot

Very weak diversification

The 3 months correlation between LandBridge and Home is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding LandBridge Company LLC and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and LandBridge Company 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 LandBridge Company LLC 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 has no effect on the direction of LandBridge Company i.e., LandBridge Company and Home Depot go up and down completely randomly.

Pair Corralation between LandBridge Company and Home Depot

Allowing for the 90-day total investment horizon LandBridge Company LLC is expected to under-perform the Home Depot. In addition to that, LandBridge Company is 3.08 times more volatile than Home Depot. It trades about -0.21 of its total potential returns per unit of risk. Home Depot is currently generating about -0.28 per unit of volatility. If you would invest  42,642  in Home Depot on September 26, 2024 and sell it today you would lose (3,028) from holding Home Depot or give up 7.1% of portfolio value over 90 days.

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

LandBridge Company LLC  vs.  Home Depot

LandBridge Company

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LandBridge Company LLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, LandBridge Company sustained solid returns over the last few months and may actually be approaching a breakup point.

Home Depot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LandBridge Company and Home Depot

The main advantage of trading using opposite LandBridge Company and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LandBridge Company 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 LandBridge Company LLC and Home Depot 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.