Correlation Between Fortune Brands and Home Depot
Can any of the company-specific risk be diversified away by investing in both Fortune Brands 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 Fortune Brands and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortune Brands Home and Home Depot, you can compare the effects of market volatilities on Fortune Brands 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 Fortune Brands with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Brands and Home Depot.
Diversification Opportunities for Fortune Brands and Home Depot
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fortune and Home is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Brands Home and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Fortune Brands 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 Fortune Brands Home 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 Fortune Brands i.e., Fortune Brands and Home Depot go up and down completely randomly.
Pair Corralation between Fortune Brands and Home Depot
If you would invest 17,857 in Home Depot on October 11, 2024 and sell it today you would earn a total of 0.00 from holding Home Depot or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 84.21% |
| Values | Daily Returns |
Fortune Brands Home vs. Home Depot
Performance |
| Timeline |
| Fortune Brands Home |
| Home Depot |
Fortune Brands and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Brands and Home Depot
The main advantage of trading using opposite Fortune Brands and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Brands 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.| Fortune Brands vs. Darden Restaurants | Fortune Brands vs. Creo Medical Group | Fortune Brands vs. Gamma Communications PLC | Fortune Brands vs. Verizon Communications |
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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 the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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