Correlation Between Home Depot and American Airlines
Can any of the company-specific risk be diversified away by investing in both Home Depot and American Airlines 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 Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and American Airlines Group, you can compare the effects of market volatilities on Home Depot and American Airlines 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 Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and American Airlines.
Diversification Opportunities for Home Depot and American Airlines
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and American is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Home Depot i.e., Home Depot and American Airlines go up and down completely randomly.
Pair Corralation between Home Depot and American Airlines
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.54 times more return on investment than American Airlines. However, Home Depot is 1.84 times less risky than American Airlines. It trades about 0.17 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.13 per unit of risk. If you would invest 38,989 in Home Depot on November 10, 2024 and sell it today you would earn a total of 1,748 from holding Home Depot or generate 4.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. American Airlines Group
Performance |
| Timeline |
| Home Depot |
| American Airlines |
Home Depot and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and American Airlines
The main advantage of trading using opposite Home Depot and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, American Airlines 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 Airlines will offset losses from the drop in American Airlines' long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. United Airlines Holdings | American Airlines vs. Frontier Group Holdings |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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