Correlation Between Home Depot and IQ Hedge

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Home Depot and IQ Hedge 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 IQ Hedge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and IQ Hedge Multi-Strategy, you can compare the effects of market volatilities on Home Depot and IQ Hedge 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 IQ Hedge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and IQ Hedge.

Diversification Opportunities for Home Depot and IQ Hedge

0.64
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Home Depot and IQ Hedge

Allowing for the 90-day total investment horizon Home Depot is expected to generate 3.99 times more return on investment than IQ Hedge. However, Home Depot is 3.99 times more volatile than IQ Hedge Multi-Strategy. It trades about 0.35 of its potential returns per unit of risk. IQ Hedge Multi-Strategy is currently generating about 0.43 per unit of risk. If you would invest  29,305  in Home Depot on May 19, 2022 and sell it today you would earn a total of  3,433  from holding Home Depot or generate 11.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  IQ Hedge Multi-Strategy

 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 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

IQ Hedge Multi-Strategy 
IQ Hedge Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in IQ Hedge Multi-Strategy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IQ Hedge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

IQ Hedge Price Channel

Home Depot and IQ Hedge Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and IQ Hedge

The main advantage of trading using opposite Home Depot and IQ Hedge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, IQ Hedge 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 IQ Hedge will offset losses from the drop in IQ Hedge's long position.
The idea behind Home Depot and IQ Hedge Multi-Strategy 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.

IQ Hedge Multi-Strategy

Pair trading matchups for IQ Hedge

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

Other Complementary Tools

Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Go
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Go
Stock Screener
Find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Go