Correlation Between Associated British and Home Depot
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Home Depot, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Home Depot.
Diversification Opportunities for Associated British and Home Depot
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Associated and Home is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Home Depot go up and down completely randomly.
Pair Corralation between Associated British and Home Depot
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the Home Depot. In addition to that, Associated British is 5.72 times more volatile than Home Depot. It trades about -0.12 of its total potential returns per unit of risk. Home Depot is currently generating about 0.21 per unit of volatility. If you would invest 17,632 in Home Depot on August 30, 2024 and sell it today you would earn a total of 225.00 from holding Home Depot or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Associated British Foods vs. Home Depot
Performance |
| Timeline |
| Associated British Foods |
| Home Depot |
Associated British and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Home Depot
The main advantage of trading using opposite Associated British and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Aurora Investment Trust | Associated British vs. New Residential Investment | Associated British vs. Oakley Capital Investments | Associated British vs. DXC Technology Co |
| Home Depot vs. Tlou Energy | Home Depot vs. Rockfire Resources plc | Home Depot vs. Ikigai Ventures | Home Depot vs. Helium One Global |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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