Correlation Between Raytheon Technologies and Home Depot
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies 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 Raytheon Technologies and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Raytheon Technologies and The Home Depot, you can compare the effects of market volatilities on Raytheon Technologies 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 Raytheon Technologies with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Home Depot.
Diversification Opportunities for Raytheon Technologies and Home Depot
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Raytheon and Home is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Raytheon Technologies 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 Raytheon Technologies 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 Raytheon Technologies i.e., Raytheon Technologies and Home Depot go up and down completely randomly.
Pair Corralation between Raytheon Technologies and Home Depot
Assuming the 90 days trading horizon Raytheon Technologies is expected to generate 1.09 times less return on investment than Home Depot. In addition to that, Raytheon Technologies is 1.03 times more volatile than The Home Depot. It trades about 0.05 of its total potential returns per unit of risk. The Home Depot is currently generating about 0.06 per unit of volatility. If you would invest 6,101 in The Home Depot on September 3, 2024 and sell it today you would earn a total of 2,976 from holding The Home Depot or generate 48.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.59% |
| Values | Daily Returns |
Raytheon Technologies vs. The Home Depot
Performance |
| Timeline |
| Raytheon Technologies |
| Home Depot |
Raytheon Technologies and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Raytheon Technologies and Home Depot
The main advantage of trading using opposite Raytheon Technologies and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies 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.| Raytheon Technologies vs. Lockheed Martin | Raytheon Technologies vs. Northrop Grumman | Raytheon Technologies vs. General Dynamics |
| Home Depot vs. Planet Fitness | Home Depot vs. Mitsubishi UFJ Financial | Home Depot vs. Credit Acceptance | Home Depot vs. Align Technology |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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