Correlation Between IQ Hedge and Home Depot

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

Diversification Opportunities for IQ Hedge and Home Depot

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between IQ Hedge and Home Depot is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding IQ Hedge Multi-Strategy and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and IQ Hedge 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 IQ Hedge Multi-Strategy 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 IQ Hedge i.e., IQ Hedge and Home Depot go up and down completely randomly.

Pair Corralation between IQ Hedge and Home Depot

Considering the 90-day investment horizon IQ Hedge Multi-Strategy is expected to under-perform the Home Depot. But the etf apears to be less risky and, when comparing its historical volatility, IQ Hedge Multi-Strategy is 3.8 times less risky than Home Depot. The etf trades about -0.04 of its potential returns per unit of risk. The Home Depot is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  26,971  in Home Depot on June 27, 2022 and sell it today you would earn a total of  123.00  from holding Home Depot or generate 0.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

IQ Hedge Multi-Strategy  vs.  Home Depot

 Performance (%) 
       Timeline  
IQ Hedge Multi-Strategy 
IQ Hedge Performance
0 of 100
Over the last 90 days IQ Hedge Multi-Strategy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IQ Hedge is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

IQ Hedge Price Channel

Home Depot 
Home Depot Performance
0 of 100
Over the last 90 days Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Depot Price Channel

IQ Hedge and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IQ Hedge and Home Depot

The main advantage of trading using opposite IQ Hedge and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IQ Hedge 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.
IQ Hedge vs. Merck Company
The idea behind IQ Hedge Multi-Strategy 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.
Home Depot vs. Industrias Bachoco SA
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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