Correlation Between HOME DEPOT and Exxon

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Can any of the company-specific risk be diversified away by investing in both HOME DEPOT and Exxon 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 Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HOME DEPOT CDR and EXXON MOBIL CDR, you can compare the effects of market volatilities on HOME DEPOT and Exxon 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 Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME DEPOT and Exxon.

Diversification Opportunities for HOME DEPOT and Exxon

HOMEExxonDiversified AwayHOMEExxonDiversified Away100%
0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between HOME and Exxon is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding HOME DEPOT CDR and EXXON MOBIL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXXON MOBIL CDR 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 CDR are associated (or correlated) with Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXXON MOBIL CDR has no effect on the direction of HOME DEPOT i.e., HOME DEPOT and Exxon go up and down completely randomly.

Pair Corralation between HOME DEPOT and Exxon

Assuming the 90 days trading horizon HOME DEPOT CDR is expected to generate 1.19 times more return on investment than Exxon. However, HOME DEPOT is 1.19 times more volatile than EXXON MOBIL CDR. It trades about -0.05 of its potential returns per unit of risk. EXXON MOBIL CDR is currently generating about -0.19 per unit of risk. If you would invest  2,652  in HOME DEPOT CDR on October 11, 2024 and sell it today you would lose (114.00) from holding HOME DEPOT CDR or give up 4.3% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

HOME DEPOT CDR  vs.  EXXON MOBIL CDR

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-505
JavaScript chart by amCharts 3.21.15HD XOM
       Timeline  
HOME DEPOT CDR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 very healthy basic indicators, HOME DEPOT is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan24.52525.52626.52727.528
EXXON MOBIL CDR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days EXXON MOBIL CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan2020.52121.52222.523

HOME DEPOT and Exxon Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.12-1.61-1.1-0.59-0.08810.370.881.391.92.41 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15HD XOM
       Returns  

Pair Trading with HOME DEPOT and Exxon

The main advantage of trading using opposite HOME DEPOT and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HOME DEPOT position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.
The idea behind HOME DEPOT CDR and EXXON MOBIL 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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