Correlation Between Home Depot and Henkel AG
Can any of the company-specific risk be diversified away by investing in both Home Depot and Henkel AG 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 Henkel AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Henkel AG Co, you can compare the effects of market volatilities on Home Depot and Henkel AG 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 Henkel AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Henkel AG.
Diversification Opportunities for Home Depot and Henkel AG
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Henkel is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Henkel AG Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henkel AG 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 Henkel AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henkel AG has no effect on the direction of Home Depot i.e., Home Depot and Henkel AG go up and down completely randomly.
Pair Corralation between Home Depot and Henkel AG
If you would invest 17,857 in Home Depot on November 3, 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 Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Henkel AG Co
Performance |
| Timeline |
| Home Depot |
| Henkel AG |
Home Depot and Henkel AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Henkel AG
The main advantage of trading using opposite Home Depot and Henkel AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Henkel AG 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 Henkel AG will offset losses from the drop in Henkel AG's long position.| Home Depot vs. Amedeo Air Four | Home Depot vs. Norwegian Air Shuttle | Home Depot vs. Wizz Air Holdings | Home Depot vs. Ryanair Holdings plc |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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