Correlation Between Home Depot and Red Robin
Can any of the company-specific risk be diversified away by investing in both Home Depot and Red Robin 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 Red Robin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Red Robin Gourmet, you can compare the effects of market volatilities on Home Depot and Red Robin 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 Red Robin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Red Robin.
Diversification Opportunities for Home Depot and Red Robin
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Red is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Red Robin Gourmet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Robin Gourmet 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 Red Robin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Robin Gourmet has no effect on the direction of Home Depot i.e., Home Depot and Red Robin go up and down completely randomly.
Pair Corralation between Home Depot and Red Robin
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.35 times more return on investment than Red Robin. However, Home Depot is 2.86 times less risky than Red Robin. It trades about 0.19 of its potential returns per unit of risk. Red Robin Gourmet is currently generating about -0.08 per unit of risk. If you would invest 40,289 in Home Depot on August 28, 2024 and sell it today you would earn a total of 2,578 from holding Home Depot or generate 6.4% 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. Red Robin Gourmet
Performance |
| Timeline |
| Home Depot |
| Red Robin Gourmet |
Home Depot and Red Robin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Red Robin
The main advantage of trading using opposite Home Depot and Red Robin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Red Robin 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 Red Robin will offset losses from the drop in Red Robin's long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Haverty Furniture Companies |
| Red Robin vs. Dine Brands Global | Red Robin vs. Bloomin Brands | Red Robin vs. BJs Restaurants | Red Robin vs. The Cheesecake Factory |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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