Correlation Between Alphabet and HOME DEPOT

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

By analyzing existing cross correlation between Alphabet Inc CDR and HOME DEPOT CDR, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of HOME DEPOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and HOME DEPOT.

Diversification Opportunities for Alphabet and HOME DEPOT

0.79

Correlation Coefficient

Alphabet  HOME DEPOT

Poor diversification

The 3 months correlation between Alphabet and HOME is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and HOME DEPOT CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT CDR and Alphabet 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 Alphabet Inc CDR 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 CDR has no effect on the direction of Alphabet i.e., Alphabet and HOME DEPOT go up and down completely randomly.

Pair Corralation between Alphabet and HOME DEPOT

Assuming the 90 days trading horizon Alphabet Inc CDR is expected to under-perform the HOME DEPOT. In addition to that, Alphabet is 1.57 times more volatile than HOME DEPOT CDR. It trades about -0.13 of its total potential returns per unit of risk. HOME DEPOT CDR is currently generating about -0.08 per unit of volatility. If you would invest  2,488  in HOME DEPOT CDR on December 31, 2024 and sell it today you would lose (196.00) from holding HOME DEPOT CDR or give up 7.88% of portfolio value over 90 days.

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

Alphabet Inc CDR  vs.  HOME DEPOT CDR

Alphabet CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

HOME DEPOT CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days HOME DEPOT CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Alphabet and HOME DEPOT

The main advantage of trading using opposite Alphabet and HOME DEPOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc CDR and HOME DEPOT CDR 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.