Correlation Between Home Depot and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Home Depot and Coca Cola 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 Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Coca Cola Co, you can compare the effects of market volatilities on Home Depot and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Coca Cola.
Diversification Opportunities for Home Depot and Coca Cola
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and Coca is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Coca Cola Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Home Depot i.e., Home Depot and Coca Cola go up and down completely randomly.
Pair Corralation between Home Depot and Coca Cola
Assuming the 90 days trading horizon Home Depot is expected to generate 0.93 times more return on investment than Coca Cola. However, Home Depot is 1.07 times less risky than Coca Cola. It trades about 0.03 of its potential returns per unit of risk. Coca Cola Co is currently generating about 0.02 per unit of risk. If you would invest 16,400 in Home Depot on August 26, 2024 and sell it today you would earn a total of 1,457 from holding Home Depot or generate 8.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Home Depot vs. Coca Cola Co
Performance |
| Timeline |
| Home Depot |
| Coca Cola |
Home Depot and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Coca Cola
The main advantage of trading using opposite Home Depot and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| Home Depot vs. Toyota Motor Corp | Home Depot vs. SoftBank Group Corp | Home Depot vs. OTP Bank Nyrt | Home Depot vs. Yum Brands |
| Coca Cola vs. GreenX Metals | Coca Cola vs. Ameriprise Financial | Coca Cola vs. Ally Financial | Coca Cola vs. Central Asia Metals |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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