Correlation Between Home Depot and Macys
Can any of the company-specific risk be diversified away by investing in both Home Depot and Macys 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 Macys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Macys Inc, you can compare the effects of market volatilities on Home Depot and Macys 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 Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Macys.
Diversification Opportunities for Home Depot and Macys
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Macys is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc 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 Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of Home Depot i.e., Home Depot and Macys go up and down completely randomly.
Pair Corralation between Home Depot and Macys
Allowing for the 90-day total investment horizon Home Depot is expected to generate 55.29 times less return on investment than Macys. But when comparing it to its historical volatility, Home Depot is 2.15 times less risky than Macys. It trades about 0.01 of its potential returns per unit of risk. Macys Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,510 in Macys Inc on September 18, 2024 and sell it today you would earn a total of 162.00 from holding Macys Inc or generate 10.73% 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. Macys Inc
Performance |
| Timeline |
| Home Depot |
| Macys Inc |
Home Depot and Macys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Macys
The main advantage of trading using opposite Home Depot and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Macys 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 Macys will offset losses from the drop in Macys' long position.| Home Depot vs. Aquagold International | Home Depot vs. Thrivent High Yield | Home Depot vs. Morningstar Unconstrained Allocation | Home Depot vs. Via Renewables |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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