Correlation Between Home Depot and Digital Media
Can any of the company-specific risk be diversified away by investing in both Home Depot and Digital Media 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 Digital Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Digital Media Solutions, you can compare the effects of market volatilities on Home Depot and Digital Media 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 Digital Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Digital Media.
Diversification Opportunities for Home Depot and Digital Media
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Home and Digital is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Digital Media Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Media Solutions 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 Digital Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Media Solutions has no effect on the direction of Home Depot i.e., Home Depot and Digital Media go up and down completely randomly.
Pair Corralation between Home Depot and Digital Media
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.18 times more return on investment than Digital Media. However, Home Depot is 5.44 times less risky than Digital Media. It trades about 0.05 of its potential returns per unit of risk. Digital Media Solutions is currently generating about -0.1 per unit of risk. If you would invest 31,613 in Home Depot on September 3, 2024 and sell it today you would earn a total of 11,300 from holding Home Depot or generate 35.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 30.91% |
| Values | Daily Returns |
Home Depot vs. Digital Media Solutions
Performance |
| Timeline |
| Home Depot |
| Digital Media Solutions |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Home Depot and Digital Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Digital Media
The main advantage of trading using opposite Home Depot and Digital Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Digital Media 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 Digital Media will offset losses from the drop in Digital Media's long position.| Home Depot vs. Partner Communications | Home Depot vs. Merck Company | Home Depot vs. Western Midstream Partners | Home Depot vs. Edgewise Therapeutics |
| Digital Media vs. Advantage Solutions | Digital Media vs. Townsquare Media | Digital Media vs. Entravision Communications | Digital Media vs. Emerald Expositions Events |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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