Correlation Between Automatic Data and Home Depot
Can any of the company-specific risk be diversified away by investing in both Automatic Data 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 Automatic Data and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automatic Data Processing and The Home Depot, you can compare the effects of market volatilities on Automatic Data 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 Automatic Data with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Home Depot.
Diversification Opportunities for Automatic Data and Home Depot
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Automatic and Home is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Automatic Data 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 Automatic Data Processing 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 Automatic Data i.e., Automatic Data and Home Depot go up and down completely randomly.
Pair Corralation between Automatic Data and Home Depot
Assuming the 90 days trading horizon Automatic Data is expected to generate 1.46 times less return on investment than Home Depot. But when comparing it to its historical volatility, Automatic Data Processing is 1.27 times less risky than Home Depot. It trades about 0.27 of its potential returns per unit of risk. The Home Depot is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 8,107 in The Home Depot on August 30, 2024 and sell it today you would earn a total of 734.00 from holding The Home Depot or generate 9.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. The Home Depot
Performance |
| Timeline |
| Automatic Data Processing |
| Home Depot |
Automatic Data and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Home Depot
The main advantage of trading using opposite Automatic Data and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data 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.| Automatic Data vs. Bread Financial Holdings | Automatic Data vs. Zoom Video Communications | Automatic Data vs. Beyond Meat | Automatic Data vs. Bank of America |
| Home Depot vs. Delta Air Lines | Home Depot vs. American Airlines Group | Home Depot vs. Mitsubishi UFJ Financial | Home Depot vs. United Airlines Holdings |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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