Correlation Between Leons Furniture and HOME DEPOT
Can any of the company-specific risk be diversified away by investing in both Leons Furniture 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 Leons Furniture and HOME DEPOT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and HOME DEPOT CDR, you can compare the effects of market volatilities on Leons Furniture 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 Leons Furniture with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and HOME DEPOT.
Diversification Opportunities for Leons Furniture and HOME DEPOT
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Leons and HOME is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited 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 Leons Furniture 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 Leons Furniture Limited 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 Leons Furniture i.e., Leons Furniture and HOME DEPOT go up and down completely randomly.
Pair Corralation between Leons Furniture and HOME DEPOT
Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the HOME DEPOT. In addition to that, Leons Furniture is 1.07 times more volatile than HOME DEPOT CDR. It trades about -0.15 of its total potential returns per unit of risk. HOME DEPOT CDR is currently generating about 0.0 per unit of volatility. If you would invest 2,552 in HOME DEPOT CDR on September 26, 2024 and sell it today you would lose (14.00) from holding HOME DEPOT CDR or give up 0.55% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Leons Furniture Limited vs. HOME DEPOT CDR
Performance |
Timeline |
Leons Furniture |
HOME DEPOT CDR |
Leons Furniture and HOME DEPOT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Leons Furniture and HOME DEPOT
The main advantage of trading using opposite Leons Furniture and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture 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.Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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