Correlation Between Home Depot and Aramark Holdings
Can any of the company-specific risk be diversified away by investing in both Home Depot and Aramark Holdings 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 Aramark Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Aramark Holdings, you can compare the effects of market volatilities on Home Depot and Aramark Holdings 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 Aramark Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Aramark Holdings.
Diversification Opportunities for Home Depot and Aramark Holdings
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Aramark is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Aramark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aramark Holdings 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 Aramark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aramark Holdings has no effect on the direction of Home Depot i.e., Home Depot and Aramark Holdings go up and down completely randomly.
Pair Corralation between Home Depot and Aramark Holdings
Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Aramark Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Home Depot is 1.26 times less risky than Aramark Holdings. The stock trades about -0.25 of its potential returns per unit of risk. The Aramark Holdings is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 3,593 in Aramark Holdings on December 23, 2024 and sell it today you would lose (151.00) from holding Aramark Holdings or give up 4.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Aramark Holdings
Performance |
| Timeline |
| Home Depot |
| Aramark Holdings |
Home Depot and Aramark Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Aramark Holdings
The main advantage of trading using opposite Home Depot and Aramark Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Aramark Holdings 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 Aramark Holdings will offset losses from the drop in Aramark Holdings' long position.| Home Depot vs. Reading International B | Home Depot vs. Barings BDC | Home Depot vs. Blk Rk Sg | Home Depot vs. Bassett Furniture Industries |
| Aramark Holdings vs. Civeo Corp | Aramark Holdings vs. ABM Industries Incorporated | Aramark Holdings vs. ADM Endeavors | Aramark Holdings vs. Maximus |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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