Correlation Between HOME DEPOT and Walmart
Can any of the company-specific risk be diversified away by investing in both HOME DEPOT and Walmart 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 Walmart 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 Walmart Inc CDR, you can compare the effects of market volatilities on HOME DEPOT and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and Walmart.
Diversification Opportunities for HOME DEPOT and Walmart
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HOME and Walmart is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and Walmart Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart Inc CDR 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart Inc CDR has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Walmart go up and down completely randomly.
Pair Corralation between HOME DEPOT and Walmart
Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 1.56 times more return on investment than Walmart. However, HOME DEPOT is 1.56 times more volatile than Walmart Inc CDR. It trades about 0.26 of its potential returns per unit of risk. Walmart Inc CDR is currently generating about 0.3 per unit of risk. If you would invest 2,511 in HOME DEPOT CDR on October 29, 2024 and sell it today you would earn a total of 158.00 from holding HOME DEPOT CDR or generate 6.29% 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. Walmart Inc CDR
Performance |
| Timeline |
| HOME DEPOT CDR |
| Walmart Inc CDR |
HOME DEPOT and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HOME DEPOT and Walmart
The main advantage of trading using opposite HOME DEPOT and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HOME DEPOT position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.| HOME DEPOT vs. Walmart Inc CDR | HOME DEPOT vs. Amazon CDR | HOME DEPOT vs. UPS CDR | HOME DEPOT vs. UnitedHealth Group CDR |
| Walmart vs. Amazon CDR | Walmart vs. Alphabet Inc CDR | Walmart vs. Apple Inc CDR | Walmart vs. Microsoft Corp CDR |
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.
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