Correlation Between Home Depot and Altria
Can any of the company-specific risk be diversified away by investing in both Home Depot and Altria 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 Altria 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 Altria Group, you can compare the effects of market volatilities on Home Depot and Altria 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 Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Altria.
Diversification Opportunities for Home Depot and Altria
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Altria is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group 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 Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of Home Depot i.e., Home Depot and Altria go up and down completely randomly.
Pair Corralation between Home Depot and Altria
Assuming the 90 days trading horizon Home Depot is expected to generate 1.05 times less return on investment than Altria. But when comparing it to its historical volatility, The Home Depot is 1.05 times less risky than Altria. It trades about 0.06 of its potential returns per unit of risk. Altria Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 20,528 in Altria Group on October 13, 2024 and sell it today you would earn a total of 10,913 from holding Altria Group or generate 53.16% 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. Altria Group
Performance |
| Timeline |
| Home Depot |
| Altria Group |
Home Depot and Altria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Altria
The main advantage of trading using opposite Home Depot and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Altria 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 Altria will offset losses from the drop in Altria's long position.| Home Depot vs. JB Hunt Transport | Home Depot vs. Taiwan Semiconductor Manufacturing | Home Depot vs. ON Semiconductor | Home Depot vs. Nordon Indstrias Metalrgicas |
| Altria vs. Energisa SA | Altria vs. BTG Pactual Logstica | Altria vs. Plano Plano Desenvolvimento | Altria vs. Ares Management |
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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