Correlation Between Home Depot and APPLE

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Can any of the company-specific risk be diversified away by investing in both Home Depot and APPLE 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 APPLE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and APPLE INC, you can compare the effects of market volatilities on Home Depot and APPLE 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 APPLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and APPLE.

Diversification Opportunities for Home Depot and APPLE

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Home and APPLE is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and APPLE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLE 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 APPLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLE INC has no effect on the direction of Home Depot i.e., Home Depot and APPLE go up and down completely randomly.

Pair Corralation between Home Depot and APPLE

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.85 times more return on investment than APPLE. However, Home Depot is 1.18 times less risky than APPLE. It trades about 0.15 of its potential returns per unit of risk. APPLE INC is currently generating about 0.08 per unit of risk. If you would invest  32,446  in Home Depot on August 24, 2024 and sell it today you would earn a total of  8,599  from holding Home Depot or generate 26.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy97.6%
ValuesDaily Returns

Home Depot  vs.  APPLE INC

 Performance 
       Timeline  
Home Depot 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in December 2024.
APPLE INC 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in APPLE INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, APPLE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Home Depot and APPLE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and APPLE

The main advantage of trading using opposite Home Depot and APPLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, APPLE 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 APPLE will offset losses from the drop in APPLE's long position.
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The idea behind Home Depot and APPLE INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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