Correlation Between AutoNation and Home Depot
Can any of the company-specific risk be diversified away by investing in both AutoNation 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 AutoNation and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoNation and Home Depot, you can compare the effects of market volatilities on AutoNation 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 AutoNation with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoNation and Home Depot.
Diversification Opportunities for AutoNation and Home Depot
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AutoNation and Home is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding AutoNation and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and AutoNation 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 AutoNation 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 AutoNation i.e., AutoNation and Home Depot go up and down completely randomly.
Pair Corralation between AutoNation and Home Depot
Allowing for the 90-day total investment horizon AutoNation is expected to generate 1.14 times more return on investment than Home Depot. However, AutoNation is 1.14 times more volatile than Home Depot. It trades about 0.13 of its potential returns per unit of risk. Home Depot is currently generating about 0.01 per unit of risk. If you would invest 16,427 in AutoNation on September 18, 2024 and sell it today you would earn a total of 619.00 from holding AutoNation or generate 3.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AutoNation vs. Home Depot
Performance |
| Timeline |
| AutoNation |
| Home Depot |
AutoNation and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoNation and Home Depot
The main advantage of trading using opposite AutoNation and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoNation 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.| AutoNation vs. Sonic Automotive | AutoNation vs. Lithia Motors | AutoNation vs. Asbury Automotive Group | AutoNation vs. Penske Automotive Group |
| Home Depot vs. Aquagold International | Home Depot vs. Thrivent High Yield | Home Depot vs. Morningstar Unconstrained Allocation | Home Depot vs. Via Renewables |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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