Correlation Between Home Depot and GreenSky

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

Diversification Opportunities for Home Depot and GreenSky

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Home Depot and GreenSky is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and GreenSky Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenSky 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 GreenSky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenSky has no effect on the direction of Home Depot i.e., Home Depot and GreenSky go up and down completely randomly.

Pair Corralation between Home Depot and GreenSky

If you would invest  30,230  in Home Depot on May 21, 2022 and sell it today you would earn a total of  2,291  from holding Home Depot or generate 7.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

Home Depot  vs.  GreenSky Inc

 Performance (%) 
       Timeline  
Home Depot 
Home Depot Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 11 (%) 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

GreenSky 
GreenSky Performance
0 of 100
Over the last 90 days GreenSky has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, GreenSky is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Home Depot and GreenSky Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and GreenSky

The main advantage of trading using opposite Home Depot and GreenSky positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, GreenSky 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 GreenSky will offset losses from the drop in GreenSky's long position.
The idea behind Home Depot and GreenSky 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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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