Correlation Between Home Depot and Auction Technology

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

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

Diversification Opportunities for Home Depot and Auction Technology

0.85

Correlation Coefficient

Home Depot  Auction Technology

Very poor diversification

The 3 months correlation between Home and Auction is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Auction Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auction Technology 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 Auction Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auction Technology has no effect on the direction of Home Depot i.e., Home Depot and Auction Technology go up and down completely randomly.

Pair Corralation between Home Depot and Auction Technology

Assuming the 90 days trading horizon Home Depot is expected to generate 0.08 times more return on investment than Auction Technology. However, Home Depot is 12.06 times less risky than Auction Technology. It trades about 0.09 of its potential returns per unit of risk. Auction Technology Group is currently generating about 0.0 per unit of risk. If you would invest  16,579  in Home Depot on September 12, 2024 and sell it today you would earn a total of  1,278  from holding Home Depot or generate 7.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.2%
Values	Daily Returns

Home Depot  vs.  Auction Technology Group

Home Depot

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Home Depot is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Auction Technology

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Auction Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Depot and Auction Technology

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

The idea behind Home Depot and Auction Technology Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.