Correlation Between Home Depot and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Home Depot and Ross Stores 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 Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Ross Stores, you can compare the effects of market volatilities on Home Depot and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Ross Stores.
Diversification Opportunities for Home Depot and Ross Stores
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and Ross is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Home Depot i.e., Home Depot and Ross Stores go up and down completely randomly.
Pair Corralation between Home Depot and Ross Stores
Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Ross Stores. But the stock apears to be less risky and, when comparing its historical volatility, Home Depot is 1.03 times less risky than Ross Stores. The stock trades about -0.07 of its potential returns per unit of risk. The Ross Stores is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 14,157 in Ross Stores on January 10, 2025 and sell it today you would lose (457.00) from holding Ross Stores or give up 3.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Ross Stores
Performance |
| Timeline |
| Home Depot |
| Ross Stores |
Home Depot and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Ross Stores
The main advantage of trading using opposite Home Depot and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| Ross Stores vs. Burlington Stores | Ross Stores vs. American Eagle Outfitters | Ross Stores vs. Lululemon Athletica | Ross Stores vs. Foot Locker |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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