Correlation Between Home Depot and AMA Group
Can any of the company-specific risk be diversified away by investing in both Home Depot and AMA Group 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 AMA Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and AMA Group Limited, you can compare the effects of market volatilities on Home Depot and AMA Group 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 AMA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and AMA Group.
Diversification Opportunities for Home Depot and AMA Group
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and AMA is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and AMA Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMA Group Limited 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 AMA Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMA Group Limited has no effect on the direction of Home Depot i.e., Home Depot and AMA Group go up and down completely randomly.
Pair Corralation between Home Depot and AMA Group
Allowing for the 90-day total investment horizon Home Depot is expected to generate 53.71 times less return on investment than AMA Group. But when comparing it to its historical volatility, Home Depot is 56.6 times less risky than AMA Group. It trades about 0.11 of its potential returns per unit of risk. AMA Group Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1.00 in AMA Group Limited on September 4, 2024 and sell it today you would earn a total of 3.75 from holding AMA Group Limited or generate 375.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.66% |
| Values | Daily Returns |
Home Depot vs. AMA Group Limited
Performance |
| Timeline |
| Home Depot |
| AMA Group Limited |
Home Depot and AMA Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and AMA Group
The main advantage of trading using opposite Home Depot and AMA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, AMA Group 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 AMA Group will offset losses from the drop in AMA Group's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands |
| AMA Group vs. Adient PLC | AMA Group vs. Lear Corporation | AMA Group vs. Autoliv | AMA Group vs. American Axle Manufacturing |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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