Correlation Between Home Depot and Apple

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

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

Diversification Opportunities for Home Depot and Apple

0.41

Correlation Coefficient

Home Depot  Apple

Very weak diversification

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

Pair Corralation between Home Depot and Apple

Assuming the 90 days trading horizon The Home Depot is expected to generate 0.8 times more return on investment than Apple. However, The Home Depot is 1.25 times less risky than Apple. It trades about -0.12 of its potential returns per unit of risk. Apple Inc is currently generating about -0.18 per unit of risk. If you would invest  37,181  in The Home Depot on December 21, 2024 and sell it today you would lose (4,181) from holding The Home Depot or give up 11.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

The Home Depot  vs.  Apple Inc

Home Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Home Depot and Apple

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

The idea behind The Home Depot and Apple Inc 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..