Correlation Between Home Depot and American Airlines
Can any of the company-specific risk be diversified away by investing in both Home Depot and American Airlines 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 American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Home Depot and American Airlines Group, you can compare the effects of market volatilities on Home Depot and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and American Airlines.
Diversification Opportunities for Home Depot and American Airlines
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Home and American is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 The Home Depot are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Home Depot i.e., Home Depot and American Airlines go up and down completely randomly.
Pair Corralation between Home Depot and American Airlines
Assuming the 90 days trading horizon The Home Depot is expected to generate 0.76 times more return on investment than American Airlines. However, The Home Depot is 1.31 times less risky than American Airlines. It trades about 0.18 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.13 per unit of risk. If you would invest 6,076 in The Home Depot on September 1, 2024 and sell it today you would earn a total of 3,001 from holding The Home Depot or generate 49.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. American Airlines Group
Performance |
| Timeline |
| Home Depot |
| American Airlines |
Home Depot and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and American Airlines
The main advantage of trading using opposite Home Depot and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Home Depot vs. Fras le SA | Home Depot vs. Western Digital | Home Depot vs. Energisa SA | Home Depot vs. Clave Indices De |
| American Airlines vs. Southwest Airlines Co | American Airlines vs. United Airlines Holdings | American Airlines vs. Clave Indices De | American Airlines vs. Fica Empreendimentos Imobiliarios |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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