Correlation Between First Republic and Home Depot

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

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

Diversification Opportunities for First Republic and Home Depot

0.0

Correlation Coefficient

First Republic  Home Depot

Pay attention - limited upside

The 3 months correlation between First and Home is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and First Republic 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 First Republic Bank 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 First Republic i.e., First Republic and Home Depot go up and down completely randomly.

Pair Corralation between First Republic and Home Depot

If you would invest  795,475  in The Home Depot on October 7, 2024 and sell it today you would earn a total of  9,825  from holding The Home Depot or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

First Republic Bank  vs.  The Home Depot

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, First Republic 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

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Home Depot are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Home Depot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Republic and Home Depot

The main advantage of trading using opposite First Republic and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Republic 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 First Republic Bank 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.