Correlation Between Walmart and Home Depot
Can any of the company-specific risk be diversified away by investing in both Walmart 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 Walmart and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Home Depot, you can compare the effects of market volatilities on Walmart 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 Walmart with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Home Depot.
Diversification Opportunities for Walmart and Home Depot
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Walmart and Home is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Walmart 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 Walmart 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 Walmart i.e., Walmart and Home Depot go up and down completely randomly.
Pair Corralation between Walmart and Home Depot
Assuming the 90 days trading horizon Walmart is expected to generate 100.21 times more return on investment than Home Depot. However, Walmart is 100.21 times more volatile than Home Depot. It trades about 0.05 of its potential returns per unit of risk. Home Depot is currently generating about 0.1 per unit of risk. If you would invest 4,325 in Walmart on August 26, 2024 and sell it today you would earn a total of 1,635 from holding Walmart or generate 37.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 98.99% |
| Values | Daily Returns |
Walmart vs. Home Depot
Performance |
| Timeline |
| Walmart |
| Home Depot |
Walmart and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Home Depot
The main advantage of trading using opposite Walmart and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.| Walmart vs. Samsung Electronics Co | Walmart vs. Samsung Electronics Co | Walmart vs. Hyundai Motor | Walmart vs. Toyota Motor Corp |
| Home Depot vs. Walmart | Home Depot vs. Volkswagen AG | Home Depot vs. Volkswagen AG Non Vtg | Home Depot vs. Compass Group PLC |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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