Correlation Between Home Depot and FIDELITY

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

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

Diversification Opportunities for Home Depot and FIDELITY

-0.6

Correlation Coefficient

Home Depot  FIDELITY

Excellent diversification

The 3 months correlation between Home and FIDELITY is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and FIDELITY NATIONAL INFORMATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIDELITY NATIONAL 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 FIDELITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIDELITY NATIONAL has no effect on the direction of Home Depot i.e., Home Depot and FIDELITY go up and down completely randomly.

Pair Corralation between Home Depot and FIDELITY

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.8 times more return on investment than FIDELITY. However, Home Depot is 1.25 times less risky than FIDELITY. It trades about 0.15 of its potential returns per unit of risk. FIDELITY NATIONAL INFORMATION is currently generating about -0.13 per unit of risk. If you would invest  37,800  in Home Depot on September 13, 2024 and sell it today you would earn a total of  4,338  from holding Home Depot or generate 11.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	87.3%
Values	Daily Returns

Home Depot  vs.  FIDELITY NATIONAL INFORMATION

Home Depot

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FIDELITY NATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FIDELITY NATIONAL INFORMATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for FIDELITY NATIONAL INFORMATION investors.

Pair Trading with Home Depot and FIDELITY

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

The idea behind Home Depot and FIDELITY NATIONAL INFORMATION 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.