Correlation Between Home Depot and Capital One
Can any of the company-specific risk be diversified away by investing in both Home Depot and Capital One 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 Home Depot and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Home Depot and Capital One Financial, you can compare the effects of market volatilities on Home Depot and Capital One 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 Home Depot with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Capital One.
Diversification Opportunities for Home Depot and Capital One
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Capital is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial and Home Depot 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 The Home Depot are associated (or correlated) with Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Home Depot i.e., Home Depot and Capital One go up and down completely randomly.
Pair Corralation between Home Depot and Capital One
Assuming the 90 days horizon Home Depot is expected to generate 1.44 times less return on investment than Capital One. But when comparing it to its historical volatility, The Home Depot is 1.41 times less risky than Capital One. It trades about 0.11 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 187,002 in Capital One Financial on September 12, 2024 and sell it today you would earn a total of 192,450 from holding Capital One Financial or generate 102.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. Capital One Financial
Performance |
| Timeline |
| Home Depot |
| Capital One Financial |
Home Depot and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Capital One
The main advantage of trading using opposite Home Depot and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.| Home Depot vs. Capital One Financial | Home Depot vs. Grupo Sports World | Home Depot vs. Verizon Communications | Home Depot vs. GMxico Transportes SAB |
| Capital One vs. Financiera Independencia SAB | Capital One vs. The Select Sector | Capital One vs. Promotora y Operadora | Capital One vs. iShares Global Timber |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |