Correlation Between Mh Elite and Home Depot

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

Diversification Opportunities for Mh Elite and Home Depot

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between MHESX and Home Depot is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mh Elite Select and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Mh Elite 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 Mh Elite Select are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Mh Elite i.e., Mh Elite and Home Depot go up and down completely randomly.

Pair Corralation between Mh Elite and Home Depot

Assuming the 90 days horizon Mh Elite Select is expected to under-perform the Home Depot. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mh Elite Select is 1.85 times less risky than Home Depot. The mutual fund trades about -0.41 of its potential returns per unit of risk. The Home Depot is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  29,632  in Home Depot on June 30, 2022 and sell it today you would lose (1,413)  from holding Home Depot or give up 4.77% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Mh Elite Select  vs.  Home Depot

 Performance (%) 
       Timeline  
Mh Elite Select 
MHESX Performance
0 of 100
Over the last 90 days Mh Elite Select has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

MHESX Price Channel

Home Depot 
Home Depot Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Depot Price Channel

Mh Elite and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mh Elite and Home Depot

The main advantage of trading using opposite Mh Elite and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mh Elite position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.
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The idea behind Mh Elite Select and Home Depot 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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