Correlation Between HOME DEPOT and Dividend

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

By analyzing existing cross correlation between HOME DEPOT CDR and Dividend 15 Split, you can compare the effects of market volatilities on HOME DEPOT and Dividend 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 Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and Dividend.

Diversification Opportunities for HOME DEPOT and Dividend

0.64

Correlation Coefficient

HOME DEPOT  Dividend

Poor diversification

The 3 months correlation between HOME and Dividend is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Dividend 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend 15 Split 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 CDR are associated (or correlated) with Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend 15 Split has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Dividend go up and down completely randomly.

Pair Corralation between HOME DEPOT and Dividend

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to under-perform the Dividend. In addition to that, HOME DEPOT is 3.29 times more volatile than Dividend 15 Split. It trades about 0.0 of its total potential returns per unit of risk. Dividend 15 Split is currently generating about 0.02 per unit of volatility. If you would invest  1,048  in Dividend 15 Split on March 26, 2025 and sell it today you would earn a total of  5.00  from holding Dividend 15 Split or generate 0.48% return on investment over 90 days.

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

HOME DEPOT CDR  vs.  Dividend 15 Split

HOME DEPOT CDR

Risk-Adjusted Performance

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.

Dividend 15 Split

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dividend is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HOME DEPOT and Dividend

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

The idea behind HOME DEPOT CDR and Dividend 15 Split 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.