Correlation Between Home Depot and Paccar
Can any of the company-specific risk be diversified away by investing in both Home Depot and Paccar 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 Paccar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Paccar Inc, you can compare the effects of market volatilities on Home Depot and Paccar 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 Paccar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Paccar.
Diversification Opportunities for Home Depot and Paccar
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Home and Paccar is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Paccar Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paccar Inc 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 Paccar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paccar Inc has no effect on the direction of Home Depot i.e., Home Depot and Paccar go up and down completely randomly.
Pair Corralation between Home Depot and Paccar
Assuming the 90 days trading horizon Home Depot is expected to generate 10.05 times less return on investment than Paccar. But when comparing it to its historical volatility, Home Depot is 8.78 times less risky than Paccar. It trades about 0.22 of its potential returns per unit of risk. Paccar Inc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 10,355 in Paccar Inc on September 2, 2024 and sell it today you would earn a total of 1,345 from holding Paccar Inc or generate 12.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Paccar Inc
Performance |
| Timeline |
| Home Depot |
| Paccar Inc |
Home Depot and Paccar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Paccar
The main advantage of trading using opposite Home Depot and Paccar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Paccar 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 Paccar will offset losses from the drop in Paccar's long position.| Home Depot vs. Livermore Investments Group | Home Depot vs. Extra Space Storage | Home Depot vs. TR Property Investment | Home Depot vs. Axway Software SA |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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