Correlation Between Home Depot and Aldeyra
Can any of the company-specific risk be diversified away by investing in both Home Depot and Aldeyra 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 Aldeyra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Aldeyra, you can compare the effects of market volatilities on Home Depot and Aldeyra 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 Aldeyra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Aldeyra.
Diversification Opportunities for Home Depot and Aldeyra
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Aldeyra is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Aldeyra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldeyra 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 Aldeyra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldeyra has no effect on the direction of Home Depot i.e., Home Depot and Aldeyra go up and down completely randomly.
Pair Corralation between Home Depot and Aldeyra
Allowing for the 90-day total investment horizon Home Depot is expected to generate 2.34 times less return on investment than Aldeyra. But when comparing it to its historical volatility, Home Depot is 4.58 times less risky than Aldeyra. It trades about 0.06 of its potential returns per unit of risk. Aldeyra is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 608.00 in Aldeyra on August 29, 2024 and sell it today you would lose (114.00) from holding Aldeyra or give up 18.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Aldeyra
Performance |
| Timeline |
| Home Depot |
| Aldeyra |
Home Depot and Aldeyra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Aldeyra
The main advantage of trading using opposite Home Depot and Aldeyra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Aldeyra 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 Aldeyra will offset losses from the drop in Aldeyra's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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