Correlation Between Home Depot and JD
Can any of the company-specific risk be diversified away by investing in both Home Depot and JD 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 JD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and JD Inc Adr, you can compare the effects of market volatilities on Home Depot and JD 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 JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and JD.
Diversification Opportunities for Home Depot and JD
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and JD is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and JD Inc Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc Adr 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 JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc Adr has no effect on the direction of Home Depot i.e., Home Depot and JD go up and down completely randomly.
Pair Corralation between Home Depot and JD
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.45 times more return on investment than JD. However, Home Depot is 2.2 times less risky than JD. It trades about 0.19 of its potential returns per unit of risk. JD Inc Adr is currently generating about -0.2 per unit of risk. If you would invest 40,289 in Home Depot on August 29, 2024 and sell it today you would earn a total of 2,663 from holding Home Depot or generate 6.61% 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. JD Inc Adr
Performance |
| Timeline |
| Home Depot |
| JD Inc Adr |
Home Depot and JD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and JD
The main advantage of trading using opposite Home Depot and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, JD 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 JD will offset losses from the drop in JD'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 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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