Correlation Between Home Depot and Advance Auto
Can any of the company-specific risk be diversified away by investing in both Home Depot and Advance Auto 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 Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Advance Auto Parts, you can compare the effects of market volatilities on Home Depot and Advance Auto 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 Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Advance Auto.
Diversification Opportunities for Home Depot and Advance Auto
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Advance is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts 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 Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of Home Depot i.e., Home Depot and Advance Auto go up and down completely randomly.
Pair Corralation between Home Depot and Advance Auto
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.44 times more return on investment than Advance Auto. However, Home Depot is 2.28 times less risky than Advance Auto. It trades about 0.05 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.07 per unit of risk. If you would invest 31,312 in Home Depot on August 23, 2024 and sell it today you would earn a total of 9,318 from holding Home Depot or generate 29.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Advance Auto Parts
Performance |
| Timeline |
| Home Depot |
| Advance Auto Parts |
Home Depot and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Advance Auto
The main advantage of trading using opposite Home Depot and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.| Home Depot vs. Small Cap Core | Home Depot vs. Freedom Holding Corp | Home Depot vs. Gfl Environmental Holdings | Home Depot vs. Growth Fund Of |
| Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |