Correlation Between Home Depot and Datalogic

Can any of the company-specific risk be diversified away by investing in both Home Depot and Datalogic 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 Datalogic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Depot and Datalogic, you can compare the effects of market volatilities on Home Depot and Datalogic 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 Datalogic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Datalogic.

Diversification Opportunities for Home Depot and Datalogic

-0.68

Correlation Coefficient

Home Depot  Datalogic

Excellent diversification

The 3 months correlation between Home and Datalogic is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Datalogic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datalogic 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 Home Depot are associated (or correlated) with Datalogic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datalogic has no effect on the direction of Home Depot i.e., Home Depot and Datalogic go up and down completely randomly.

Pair Corralation between Home Depot and Datalogic

Assuming the 90 days trading horizon Home Depot is expected to generate 0.08 times more return on investment than Datalogic. However, Home Depot is 12.5 times less risky than Datalogic. It trades about 0.09 of its potential returns per unit of risk. Datalogic is currently generating about -0.03 per unit of risk. If you would invest  16,193  in Home Depot on October 10, 2024 and sell it today you would earn a total of  1,664  from holding Home Depot or generate 10.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Home Depot  vs.  Datalogic

Home Depot

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Home Depot is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Datalogic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datalogic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Home Depot and Datalogic

The main advantage of trading using opposite Home Depot and Datalogic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Datalogic 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 Datalogic will offset losses from the drop in Datalogic's long position.

The idea behind Home Depot and Datalogic 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.