Correlation Between STATE STREET and Home Depot

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

Diversification Opportunities for STATE STREET and Home Depot

  Correlation Coefficient

Weak diversification

The 3 months correlation between STATE and Home Depot is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding STATE STREET AGGREGATE and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and STATE STREET 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 STATE STREET AGGREGATE 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 STATE STREET i.e., STATE STREET and Home Depot go up and down completely randomly.

Pair Corralation between STATE STREET and Home Depot

Assuming the 90 days horizon STATE STREET AGGREGATE is expected to under-perform the Home Depot. But the mutual fund apears to be less risky and, when comparing its historical volatility, STATE STREET AGGREGATE is 4.43 times less risky than Home Depot. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Home Depot is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  25,376  in Home Depot on September 5, 2022 and sell it today you would earn a total of  7,423  from holding Home Depot or generate 29.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns


 Performance (%) 
STATE Performance
0 of 100
Over the last 90 days STATE STREET AGGREGATE has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, STATE STREET is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

STATE Price Channel

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 uncertain fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.

Home Depot Price Channel

STATE STREET and Home Depot Volatility Contrast

   Predicted Return Density   

Pair Trading with STATE STREET and Home Depot

The main advantage of trading using opposite STATE STREET and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STATE STREET 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.
STATE STREET vs. JPMorgan Chase Co
The idea behind STATE STREET AGGREGATE 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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