Correlation Between Uber Technologies and Home Depot

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Can any of the company-specific risk be diversified away by investing in both Uber 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 Uber 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 Uber Technologies and The Home Depot, you can compare the effects of market volatilities on Uber 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 Uber Technologies with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uber Technologies and Home Depot.

Diversification Opportunities for Uber Technologies and Home Depot

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Uber and Home is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Uber 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 Uber 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 Uber 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 Uber Technologies i.e., Uber Technologies and Home Depot go up and down completely randomly.

Pair Corralation between Uber Technologies and Home Depot

Assuming the 90 days trading horizon Uber Technologies is expected to generate 1.97 times less return on investment than Home Depot. In addition to that, Uber Technologies is 2.24 times more volatile than The Home Depot. It trades about 0.06 of its total potential returns per unit of risk. The Home Depot is currently generating about 0.26 per unit of volatility. If you would invest  7,993  in The Home Depot on September 5, 2024 and sell it today you would earn a total of  1,213  from holding The Home Depot or generate 15.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Uber Technologies  vs.  The Home Depot

 Performance 
       Timeline  
Uber Technologies 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Uber Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Home Depot 

Risk-Adjusted Performance

27 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in The Home Depot are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Home Depot sustained solid returns over the last few months and may actually be approaching a breakup point.

Uber Technologies and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Uber Technologies and Home Depot

The main advantage of trading using opposite Uber Technologies and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uber 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.
The idea behind Uber Technologies and The Home Depot pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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