Correlation Between Home Depot and Stitch Fix
Can any of the company-specific risk be diversified away by investing in both Home Depot and Stitch Fix 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 Stitch Fix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Stitch Fix, you can compare the effects of market volatilities on Home Depot and Stitch Fix 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 Stitch Fix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Stitch Fix.
Diversification Opportunities for Home Depot and Stitch Fix
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Home and Stitch is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Stitch Fix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stitch Fix 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 Stitch Fix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stitch Fix has no effect on the direction of Home Depot i.e., Home Depot and Stitch Fix go up and down completely randomly.
Pair Corralation between Home Depot and Stitch Fix
Allowing for the 90-day total investment horizon Home Depot is expected to generate 38.5 times less return on investment than Stitch Fix. But when comparing it to its historical volatility, Home Depot is 2.25 times less risky than Stitch Fix. It trades about 0.01 of its potential returns per unit of risk. Stitch Fix is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 505.00 in Stitch Fix on November 18, 2024 and sell it today you would earn a total of 36.00 from holding Stitch Fix or generate 7.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Stitch Fix
Performance |
| Timeline |
| Home Depot |
| Stitch Fix |
Home Depot and Stitch Fix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Stitch Fix
The main advantage of trading using opposite Home Depot and Stitch Fix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Stitch Fix 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 Stitch Fix will offset losses from the drop in Stitch Fix's long position.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies | Home Depot vs. Kirklands |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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