Correlation Between ConocoPhillips and Home Depot

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

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

Diversification Opportunities for ConocoPhillips and Home Depot

0.54

Correlation Coefficient

ConocoPhillips  Home Depot

Very weak diversification

The 3 months correlation between ConocoPhillips and Home is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ConocoPhillips and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and ConocoPhillips 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 ConocoPhillips 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 ConocoPhillips i.e., ConocoPhillips and Home Depot go up and down completely randomly.

Pair Corralation between ConocoPhillips and Home Depot

Assuming the 90 days trading horizon ConocoPhillips is expected to generate 1.03 times more return on investment than Home Depot. However, ConocoPhillips is 1.03 times more volatile than The Home Depot. It trades about 0.0 of its potential returns per unit of risk. The Home Depot is currently generating about -0.1 per unit of risk. If you would invest  4,943  in ConocoPhillips on December 25, 2024 and sell it today you would lose (60.00) from holding ConocoPhillips or give up 1.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ConocoPhillips  vs.  The Home Depot

ConocoPhillips

Risk-Adjusted Performance

Very Weak

Over the last 90 days ConocoPhillips has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ConocoPhillips is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Home Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ConocoPhillips and Home Depot

The main advantage of trading using opposite ConocoPhillips and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ConocoPhillips 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 ConocoPhillips 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.