Correlation Between American Funds and HOME DEPOT
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and HOME DEPOT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and HOME DEPOT, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and HOME DEPOT.
Diversification Opportunities for American Funds and HOME DEPOT
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and HOME is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and HOME DEPOT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT and American Funds 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 American Funds Fundamental 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 American Funds i.e., American Funds and HOME DEPOT go up and down completely randomly.
Pair Corralation between American Funds and HOME DEPOT
Assuming the 90 days horizon American Funds is expected to generate 2.36 times less return on investment than HOME DEPOT. But when comparing it to its historical volatility, American Funds Fundamental is 1.44 times less risky than HOME DEPOT. It trades about 0.19 of its potential returns per unit of risk. HOME DEPOT is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 37,520 in HOME DEPOT on October 23, 2024 and sell it today you would earn a total of 2,550 from holding HOME DEPOT or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 89.47% |
| Values | Daily Returns |
American Funds Fundamental vs. HOME DEPOT
Performance |
| Timeline |
| American Funds Funda |
| HOME DEPOT |
American Funds and HOME DEPOT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and HOME DEPOT
The main advantage of trading using opposite American Funds and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Virtus High Yield | American Funds vs. Ab High Income | American Funds vs. Multi Manager High Yield | American Funds vs. Ab High Income |
| HOME DEPOT vs. Plastic Omnium | HOME DEPOT vs. Siamgas And Petrochemicals | HOME DEPOT vs. Tyson Foods | HOME DEPOT vs. Vulcan Materials |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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