Correlation Between CVS Health and Home Depot
Can any of the company-specific risk be diversified away by investing in both CVS Health 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 CVS Health and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and The Home Depot, you can compare the effects of market volatilities on CVS Health 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 CVS Health with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Home Depot.
Diversification Opportunities for CVS Health and Home Depot
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between CVS and Home is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and CVS Health 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 CVS Health 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 CVS Health i.e., CVS Health and Home Depot go up and down completely randomly.
Pair Corralation between CVS Health and Home Depot
Assuming the 90 days trading horizon CVS Health is expected to generate 5.06 times less return on investment than Home Depot. In addition to that, CVS Health is 1.84 times more volatile than The Home Depot. It trades about 0.01 of its total potential returns per unit of risk. The Home Depot is currently generating about 0.07 per unit of volatility. If you would invest 25,547 in The Home Depot on November 30, 2024 and sell it today you would earn a total of 12,138 from holding The Home Depot or generate 47.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. The Home Depot
Performance |
| Timeline |
| CVS Health |
| Home Depot |
CVS Health and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Home Depot
The main advantage of trading using opposite CVS Health and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health 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.| CVS Health vs. American Public Education | CVS Health vs. Strategic Education | CVS Health vs. STRAYER EDUCATION | CVS Health vs. INTERCONT HOTELS |
| Home Depot vs. HANOVER INSURANCE | Home Depot vs. Evolution Mining Limited | Home Depot vs. GREENX METALS LTD | Home Depot vs. Ping An Insurance |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Positions Ratings 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 | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |