Correlation Between Home Depot and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Home Depot and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Home Depot and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Dow Jones.
Diversification Opportunities for Home Depot and Dow Jones
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Dow is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Home Depot i.e., Home Depot and Dow Jones go up and down completely randomly.
Pair Corralation between Home Depot and Dow Jones
Assuming the 90 days horizon The Home Depot is expected to generate 1.59 times more return on investment than Dow Jones. However, Home Depot is 1.59 times more volatile than Dow Jones Industrial. It trades about 0.33 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.17 per unit of risk. If you would invest 784,182 in The Home Depot on October 20, 2024 and sell it today you would earn a total of 65,818 from holding The Home Depot or generate 8.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. Dow Jones Industrial
Performance |
| Timeline |
Home Depot and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
The Home Depot
Pair trading matchups for Home Depot
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Home Depot and Dow Jones
The main advantage of trading using opposite Home Depot and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Home Depot vs. Samsung Electronics Co | Home Depot vs. Grupo Sports World | Home Depot vs. GMxico Transportes SAB | Home Depot vs. Verizon Communications |
| Dow Jones vs. SkyWest | Dow Jones vs. Air Transport Services | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Emerson Radio |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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