Correlation Between Home Depot and BOND FUND

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Can any of the company-specific risk be diversified away by investing in both Home Depot and BOND FUND 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 BOND FUND into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and BOND FUND OF, you can compare the effects of market volatilities on Home Depot and BOND FUND 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 BOND FUND. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and BOND FUND.

Diversification Opportunities for Home Depot and BOND FUND

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Home Depot and CFACX is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and BOND FUND OF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOND FUND 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 BOND FUND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOND FUND has no effect on the direction of Home Depot i.e., Home Depot and BOND FUND go up and down completely randomly.

Pair Corralation between Home Depot and BOND FUND

Allowing for the 90-day total investment horizon Home Depot is expected to generate 4.39 times more return on investment than BOND FUND. However, Home Depot is 4.39 times more volatile than BOND FUND OF. It trades about 0.16 of its potential returns per unit of risk. BOND FUND OF is currently generating about 0.04 per unit of risk. If you would invest  28,199  in Home Depot on September 2, 2022 and sell it today you would earn a total of  4,200  from holding Home Depot or generate 14.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  BOND FUND OF

 Performance (%) 
       Timeline  
Home Depot 
Home Depot Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.

Home Depot Price Channel

BOND FUND 
CFACX Performance
0 of 100
Over the last 90 days BOND FUND OF has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, BOND FUND is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CFACX Price Channel

Home Depot and BOND FUND Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and BOND FUND

The main advantage of trading using opposite Home Depot and BOND FUND positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, BOND FUND 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 BOND FUND will offset losses from the drop in BOND FUND's long position.
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The idea behind Home Depot and BOND FUND OF 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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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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