Correlation Between HOME DEPOT and American Hotel
Can any of the company-specific risk be diversified away by investing in both HOME DEPOT and American Hotel 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 American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HOME DEPOT CDR and American Hotel Income, you can compare the effects of market volatilities on HOME DEPOT and American Hotel 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 American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and American Hotel.
Diversification Opportunities for HOME DEPOT and American Hotel
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HOME and American is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income 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 HOME DEPOT CDR are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and American Hotel go up and down completely randomly.
Pair Corralation between HOME DEPOT and American Hotel
Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 0.6 times more return on investment than American Hotel. However, HOME DEPOT CDR is 1.68 times less risky than American Hotel. It trades about 0.26 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.36 per unit of risk. If you would invest 2,543 in HOME DEPOT CDR on September 3, 2024 and sell it today you would earn a total of 212.00 from holding HOME DEPOT CDR or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HOME DEPOT CDR vs. American Hotel Income
Performance |
| Timeline |
| HOME DEPOT CDR |
| American Hotel Income |
HOME DEPOT and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HOME DEPOT and American Hotel
The main advantage of trading using opposite HOME DEPOT and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HOME DEPOT position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.| HOME DEPOT vs. Canlan Ice Sports | HOME DEPOT vs. Lion One Metals | HOME DEPOT vs. Algonquin Power Utilities | HOME DEPOT vs. Perseus Mining |
| American Hotel vs. KDA Group | American Hotel vs. BMO Aggregate Bond | American Hotel vs. Terreno Resources Corp | American Hotel vs. iShares Canadian HYBrid |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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