Correlation Between Home Depot and XTM
Can any of the company-specific risk be diversified away by investing in both Home Depot and XTM 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 XTM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and XTM Inc, you can compare the effects of market volatilities on Home Depot and XTM 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 XTM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and XTM.
Diversification Opportunities for Home Depot and XTM
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and XTM is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and XTM Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTM 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 XTM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTM Inc has no effect on the direction of Home Depot i.e., Home Depot and XTM go up and down completely randomly.
Pair Corralation between Home Depot and XTM
Allowing for the 90-day total investment horizon Home Depot is expected to generate 41.55 times less return on investment than XTM. But when comparing it to its historical volatility, Home Depot is 70.38 times less risky than XTM. It trades about 0.23 of its potential returns per unit of risk. XTM Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1.41 in XTM Inc on September 2, 2024 and sell it today you would earn a total of 3.73 from holding XTM Inc or generate 264.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Home Depot vs. XTM Inc
Performance |
| Timeline |
| Home Depot |
| XTM Inc |
Home Depot and XTM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and XTM
The main advantage of trading using opposite Home Depot and XTM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, XTM 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 XTM will offset losses from the drop in XTM's long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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