Correlation Between Home Depot and American Express
Can any of the company-specific risk be diversified away by investing in both Home Depot and American Express 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 Express 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 Express, you can compare the effects of market volatilities on Home Depot and American Express 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 Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and American Express.
Diversification Opportunities for Home Depot and American Express
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and American is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Home Depot i.e., Home Depot and American Express go up and down completely randomly.
Pair Corralation between Home Depot and American Express
Assuming the 90 days trading horizon The Home Depot is expected to under-perform the American Express. In addition to that, Home Depot is 1.42 times more volatile than American Express. It trades about -0.03 of its total potential returns per unit of risk. American Express is currently generating about 0.15 per unit of volatility. If you would invest 18,185 in American Express on October 19, 2024 and sell it today you would earn a total of 626.00 from holding American Express or generate 3.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
The Home Depot vs. American Express
Performance |
| Timeline |
| Home Depot |
| American Express |
Home Depot and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and American Express
The main advantage of trading using opposite Home Depot and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, American Express 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 Express will offset losses from the drop in American Express' long position.| Home Depot vs. METISA Metalrgica Timboense | Home Depot vs. Martin Marietta Materials, | Home Depot vs. Tyson Foods | Home Depot vs. Marfrig Global Foods |
| American Express vs. The Home Depot | American Express vs. Academy Sports and | American Express vs. Live Nation Entertainment, | American Express vs. Nordon Indstrias Metalrgicas |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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