Correlation Between Home Depot and Southwestern Energy
Can any of the company-specific risk be diversified away by investing in both Home Depot and Southwestern Energy 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 Southwestern Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Southwestern Energy, you can compare the effects of market volatilities on Home Depot and Southwestern Energy 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 Southwestern Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Southwestern Energy.
Diversification Opportunities for Home Depot and Southwestern Energy
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and Southwestern is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Southwestern Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwestern Energy 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 Southwestern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwestern Energy has no effect on the direction of Home Depot i.e., Home Depot and Southwestern Energy go up and down completely randomly.
Pair Corralation between Home Depot and Southwestern Energy
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.74 times more return on investment than Southwestern Energy. However, Home Depot is 1.35 times less risky than Southwestern Energy. It trades about 0.1 of its potential returns per unit of risk. Southwestern Energy is currently generating about 0.03 per unit of risk. If you would invest 30,541 in Home Depot on August 24, 2024 and sell it today you would earn a total of 11,120 from holding Home Depot or generate 36.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 84.8% |
| Values | Daily Returns |
Home Depot vs. Southwestern Energy
Performance |
| Timeline |
| Home Depot |
| Southwestern Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Home Depot and Southwestern Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Southwestern Energy
The main advantage of trading using opposite Home Depot and Southwestern Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Southwestern Energy 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 Southwestern Energy will offset losses from the drop in Southwestern Energy's long position.| Home Depot vs. Live Ventures | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies | Home Depot vs. Tile Shop Holdings |
| Southwestern Energy vs. Antero Resources Corp | Southwestern Energy vs. EQT Corporation | Southwestern Energy vs. Matador Resources | Southwestern Energy vs. Range Resources Corp |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |