Correlation Between Home Depot and First American
Can any of the company-specific risk be diversified away by investing in both Home Depot and First American 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 First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and First American Funds, you can compare the effects of market volatilities on Home Depot and First American 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 First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and First American.
Diversification Opportunities for Home Depot and First American
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and First is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and First American Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Funds 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 First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Funds has no effect on the direction of Home Depot i.e., Home Depot and First American go up and down completely randomly.
Pair Corralation between Home Depot and First American
If you would invest 39,169 in Home Depot on September 1, 2024 and sell it today you would earn a total of 3,744 from holding Home Depot or generate 9.56% 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. First American Funds
Performance |
| Timeline |
| Home Depot |
| First American Funds |
Home Depot and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and First American
The main advantage of trading using opposite Home Depot and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, First American 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 First American will offset losses from the drop in First American'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 |
| First American vs. Barings Emerging Markets | First American vs. Sp Midcap Index | First American vs. Goldman Sachs Emerging | First American vs. Vanguard Developed Markets |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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