Correlation Between Home Depot and DXC Technology
Can any of the company-specific risk be diversified away by investing in both Home Depot and DXC Technology 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 DXC Technology 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 DXC Technology, you can compare the effects of market volatilities on Home Depot and DXC Technology 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 DXC Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and DXC Technology.
Diversification Opportunities for Home Depot and DXC Technology
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and DXC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and DXC Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology 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 DXC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXC Technology has no effect on the direction of Home Depot i.e., Home Depot and DXC Technology go up and down completely randomly.
Pair Corralation between Home Depot and DXC Technology
Assuming the 90 days trading horizon The Home Depot is expected to generate 0.86 times more return on investment than DXC Technology. However, The Home Depot is 1.16 times less risky than DXC Technology. It trades about 0.03 of its potential returns per unit of risk. DXC Technology is currently generating about -0.22 per unit of risk. If you would invest 8,477 in The Home Depot on November 5, 2024 and sell it today you would earn a total of 50.00 from holding The Home Depot or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. DXC Technology
Performance |
| Timeline |
| Home Depot |
| DXC Technology |
Home Depot and DXC Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and DXC Technology
The main advantage of trading using opposite Home Depot and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, DXC Technology 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 DXC Technology will offset losses from the drop in DXC Technology's long position.| Home Depot vs. METISA Metalrgica Timboense | Home Depot vs. Metalurgica Gerdau SA | Home Depot vs. Tres Tentos Agroindustrial | Home Depot vs. JB Hunt Transport |
| DXC Technology vs. Accenture plc | DXC Technology vs. International Business Machines | DXC Technology vs. Infosys Limited | DXC Technology vs. Fiserv Inc |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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