Correlation Between Home Depot and Africa Oil
Can any of the company-specific risk be diversified away by investing in both Home Depot and Africa Oil 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 Africa Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Africa Oil Corp, you can compare the effects of market volatilities on Home Depot and Africa Oil 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 Africa Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Africa Oil.
Diversification Opportunities for Home Depot and Africa Oil
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Africa is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Africa Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Oil Corp 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 Africa Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Oil Corp has no effect on the direction of Home Depot i.e., Home Depot and Africa Oil go up and down completely randomly.
Pair Corralation between Home Depot and Africa Oil
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.58 times more return on investment than Africa Oil. However, Home Depot is 1.72 times less risky than Africa Oil. It trades about 0.06 of its potential returns per unit of risk. Africa Oil Corp is currently generating about -0.01 per unit of risk. If you would invest 30,940 in Home Depot on August 29, 2024 and sell it today you would earn a total of 12,012 from holding Home Depot or generate 38.82% 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. Africa Oil Corp
Performance |
| Timeline |
| Home Depot |
| Africa Oil Corp |
Home Depot and Africa Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Africa Oil
The main advantage of trading using opposite Home Depot and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Africa Oil 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 Africa Oil will offset losses from the drop in Africa Oil's long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
| Africa Oil vs. Gear Energy | Africa Oil vs. Tamarack Valley Energy | Africa Oil vs. MEG Energy Corp | Africa Oil vs. Cardinal Energy |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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