Correlation Between Home Depot and Alphabet
Can any of the company-specific risk be diversified away by investing in both Home Depot and Alphabet 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 Alphabet 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 Alphabet, you can compare the effects of market volatilities on Home Depot and Alphabet 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 Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Alphabet.
Diversification Opportunities for Home Depot and Alphabet
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Alphabet is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Alphabet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet has no effect on the direction of Home Depot i.e., Home Depot and Alphabet go up and down completely randomly.
Pair Corralation between Home Depot and Alphabet
Assuming the 90 days trading horizon The Home Depot is expected to under-perform the Alphabet. But the stock apears to be less risky and, when comparing its historical volatility, The Home Depot is 1.16 times less risky than Alphabet. The stock trades about -0.28 of its potential returns per unit of risk. The Alphabet is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 9,350 in Alphabet on October 11, 2024 and sell it today you would earn a total of 480.00 from holding Alphabet or generate 5.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Home Depot vs. Alphabet
Performance |
| Timeline |
| Home Depot |
| Alphabet |
Home Depot and Alphabet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Alphabet
The main advantage of trading using opposite Home Depot and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.| Home Depot vs. Prudential Financial | Home Depot vs. salesforce inc | Home Depot vs. LPL Financial Holdings | Home Depot vs. Discover Financial Services |
| Alphabet vs. Unifique Telecomunicaes SA | Alphabet vs. Martin Marietta Materials, | Alphabet vs. Bank of America | Alphabet vs. KB Financial Group |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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