Correlation Between Home Depot and ALPHACENTRIC HEDGED

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

Diversification Opportunities for Home Depot and ALPHACENTRIC HEDGED

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Home Depot and ALPHACENTRIC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ALPHACENTRIC HEDGED MARKET in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPHACENTRIC HEDGED 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 ALPHACENTRIC HEDGED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPHACENTRIC HEDGED has no effect on the direction of Home Depot i.e., Home Depot and ALPHACENTRIC HEDGED go up and down completely randomly.

Pair Corralation between Home Depot and ALPHACENTRIC HEDGED

Allowing for the 90-day total investment horizon Home Depot is expected to generate 2.78 times more return on investment than ALPHACENTRIC HEDGED. However, Home Depot is 2.78 times more volatile than ALPHACENTRIC HEDGED MARKET. It trades about 0.04 of its potential returns per unit of risk. ALPHACENTRIC HEDGED MARKET is currently generating about -0.03 per unit of risk. If you would invest  29,297  in Home Depot on September 3, 2022 and sell it today you would earn a total of  3,403  from holding Home Depot or generate 11.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.4%
ValuesDaily Returns

Home Depot  vs.  ALPHACENTRIC HEDGED MARKET

 Performance (%) 
       Timeline  
Home Depot 
Home Depot Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.

Home Depot Price Channel

ALPHACENTRIC HEDGED 
ALPHACENTRIC Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in ALPHACENTRIC HEDGED MARKET are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, ALPHACENTRIC HEDGED is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ALPHACENTRIC Price Channel

Home Depot and ALPHACENTRIC HEDGED Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and ALPHACENTRIC HEDGED

The main advantage of trading using opposite Home Depot and ALPHACENTRIC HEDGED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, ALPHACENTRIC HEDGED 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 ALPHACENTRIC HEDGED will offset losses from the drop in ALPHACENTRIC HEDGED's long position.
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The idea behind Home Depot and ALPHACENTRIC HEDGED MARKET 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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ALPHACENTRIC HEDGED vs. GROWTH FUND OF
ALPHACENTRIC HEDGED vs. VANGUARD SMALL-CAP GROWTH
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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