Correlation Between Home Depot and 1StdibsCom

Can any of the company-specific risk be diversified away by investing in both Home Depot and 1StdibsCom 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 1StdibsCom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Depot and 1StdibsCom, you can compare the effects of market volatilities on Home Depot and 1StdibsCom 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 1StdibsCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and 1StdibsCom.

Diversification Opportunities for Home Depot and 1StdibsCom

-0.66

Correlation Coefficient

Home Depot  1StdibsCom

Excellent diversification

The 3 months correlation between Home and 1StdibsCom is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and 1StdibsCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1StdibsCom 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 1StdibsCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1StdibsCom has no effect on the direction of Home Depot i.e., Home Depot and 1StdibsCom go up and down completely randomly.

Pair Corralation between Home Depot and 1StdibsCom

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.56 times more return on investment than 1StdibsCom. However, Home Depot is 1.8 times less risky than 1StdibsCom. It trades about 0.23 of its potential returns per unit of risk. 1StdibsCom is currently generating about -0.14 per unit of risk. If you would invest  36,283  in Home Depot on August 31, 2024 and sell it today you would earn a total of  6,630  from holding Home Depot or generate 18.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Home Depot  vs.  1StdibsCom

Home Depot

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.

1StdibsCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1StdibsCom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Home Depot and 1StdibsCom

The main advantage of trading using opposite Home Depot and 1StdibsCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, 1StdibsCom 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 1StdibsCom will offset losses from the drop in 1StdibsCom's long position.

The idea behind Home Depot and 1StdibsCom 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.