Correlation Between Home Depot and Key Tronic
Can any of the company-specific risk be diversified away by investing in both Home Depot and Key Tronic 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 Key Tronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Key Tronic, you can compare the effects of market volatilities on Home Depot and Key Tronic 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 Key Tronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Key Tronic.
Diversification Opportunities for Home Depot and Key Tronic
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Key is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Key Tronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Key Tronic 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 Key Tronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Key Tronic has no effect on the direction of Home Depot i.e., Home Depot and Key Tronic go up and down completely randomly.
Pair Corralation between Home Depot and Key Tronic
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.55 times more return on investment than Key Tronic. However, Home Depot is 1.83 times less risky than Key Tronic. It trades about 0.09 of its potential returns per unit of risk. Key Tronic is currently generating about 0.01 per unit of risk. If you would invest 29,008 in Home Depot on August 31, 2024 and sell it today you would earn a total of 13,905 from holding Home Depot or generate 47.94% 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. Key Tronic
Performance |
| Timeline |
| Home Depot |
| Key Tronic |
Home Depot and Key Tronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Key Tronic
The main advantage of trading using opposite Home Depot and Key Tronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Key Tronic 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 Key Tronic will offset losses from the drop in Key Tronic's long position.| Home Depot vs. RLJ Lodging Trust | Home Depot vs. Aquagold International | Home Depot vs. Stepstone Group | Home Depot vs. Morningstar Unconstrained Allocation |
| Key Tronic vs. AGM Group Holdings | Key Tronic vs. TransAct Technologies Incorporated | Key Tronic vs. AstroNova | Key Tronic vs. Quantum |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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