Correlation Between Home Depot and Avanti Energy
Can any of the company-specific risk be diversified away by investing in both Home Depot and Avanti Energy 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 Avanti Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Avanti Energy, you can compare the effects of market volatilities on Home Depot and Avanti Energy 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 Avanti Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Avanti Energy.
Diversification Opportunities for Home Depot and Avanti Energy
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Home and Avanti is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Avanti Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanti Energy 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 Avanti Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanti Energy has no effect on the direction of Home Depot i.e., Home Depot and Avanti Energy go up and down completely randomly.
Pair Corralation between Home Depot and Avanti Energy
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.23 times more return on investment than Avanti Energy. However, Home Depot is 4.31 times less risky than Avanti Energy. It trades about 0.09 of its potential returns per unit of risk. Avanti Energy is currently generating about -0.04 per unit of risk. If you would invest 28,986 in Home Depot on September 2, 2024 and sell it today you would earn a total of 13,927 from holding Home Depot or generate 48.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Avanti Energy
Performance |
| Timeline |
| Home Depot |
| Avanti Energy |
Home Depot and Avanti Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Avanti Energy
The main advantage of trading using opposite Home Depot and Avanti Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Avanti Energy 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 Avanti Energy will offset losses from the drop in Avanti Energy'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 |
| Avanti Energy vs. Desert Mountain Energy | Avanti Energy vs. Avanti Energy | Avanti Energy vs. Royal Helium | Avanti Energy vs. Total Helium |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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