Correlation Between Home Depot and Arko Corp
Can any of the company-specific risk be diversified away by investing in both Home Depot and Arko Corp 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 Arko Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Arko Corp, you can compare the effects of market volatilities on Home Depot and Arko Corp 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 Arko Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Arko Corp.
Diversification Opportunities for Home Depot and Arko Corp
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Arko is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Arko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arko 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 Arko Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arko Corp has no effect on the direction of Home Depot i.e., Home Depot and Arko Corp go up and down completely randomly.
Pair Corralation between Home Depot and Arko Corp
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.64 times more return on investment than Arko Corp. However, Home Depot is 1.56 times less risky than Arko Corp. It trades about 0.19 of its potential returns per unit of risk. Arko Corp is currently generating about 0.07 per unit of risk. If you would invest 40,289 in Home Depot on August 28, 2024 and sell it today you would earn a total of 2,578 from holding Home Depot or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Arko Corp
Performance |
| Timeline |
| Home Depot |
| Arko Corp |
Home Depot and Arko Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Arko Corp
The main advantage of trading using opposite Home Depot and Arko Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Arko Corp 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 Arko Corp will offset losses from the drop in Arko Corp's long position.The idea behind Home Depot and Arko Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Arko Corp vs. Murphy USA | Arko Corp vs. National Vision Holdings | Arko Corp vs. ODP Corp | Arko Corp vs. Genuine Parts Co |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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