Correlation Between Capital One and Home Depot
Can any of the company-specific risk be diversified away by investing in both Capital One 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 Capital One and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital One Financial and The Home Depot, you can compare the effects of market volatilities on Capital One 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 Capital One with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Home Depot.
Diversification Opportunities for Capital One and Home Depot
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Home is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Capital One 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 Capital One Financial 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 Capital One i.e., Capital One and Home Depot go up and down completely randomly.
Pair Corralation between Capital One and Home Depot
Assuming the 90 days trading horizon Capital One Financial is expected to generate 0.12 times more return on investment than Home Depot. However, Capital One Financial is 8.48 times less risky than Home Depot. It trades about -0.24 of its potential returns per unit of risk. The Home Depot is currently generating about -0.19 per unit of risk. If you would invest 56,772 in Capital One Financial on October 14, 2024 and sell it today you would lose (492.00) from holding Capital One Financial or give up 0.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. The Home Depot
Performance |
| Timeline |
| Capital One Financial |
| Home Depot |
Capital One and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Home Depot
The main advantage of trading using opposite Capital One and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One 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.| Capital One vs. Melco Resorts Entertainment | Capital One vs. Electronic Arts | Capital One vs. Burlington Stores, | Capital One vs. STMicroelectronics NV |
| Home Depot vs. Ares Management | Home Depot vs. Tyson Foods | Home Depot vs. Capital One Financial | Home Depot vs. Marfrig Global Foods |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |