Correlation Between Imperial Brands and Home Depot
Can any of the company-specific risk be diversified away by investing in both Imperial Brands and Home Depot 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 Imperial Brands and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Imperial Brands PLC and Home Depot, you can compare the effects of market volatilities on Imperial Brands and Home Depot 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 Imperial Brands with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and Home Depot.
Diversification Opportunities for Imperial Brands and Home Depot
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Imperial and Home is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Imperial Brands 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 Imperial Brands PLC are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Imperial Brands i.e., Imperial Brands and Home Depot go up and down completely randomly.
Pair Corralation between Imperial Brands and Home Depot
If you would invest 258,600 in Imperial Brands PLC on November 2, 2024 and sell it today you would earn a total of 11,000 from holding Imperial Brands PLC or generate 4.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Imperial Brands PLC vs. Home Depot
Performance |
| Timeline |
| Imperial Brands PLC |
| Home Depot |
Imperial Brands and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Brands and Home Depot
The main advantage of trading using opposite Imperial Brands and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Brands position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Imperial Brands vs. Anglo Asian Mining | Imperial Brands vs. GoldMining | Imperial Brands vs. Ecclesiastical Insurance Office | Imperial Brands vs. Ally Financial |
| Home Depot vs. Samsung Electronics Co | Home Depot vs. Samsung Electronics Co | Home Depot vs. Toyota Motor Corp | Home Depot vs. SoftBank Group Corp |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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