Correlation Between Home Depot and Performance Food

Can any of the company-specific risk be diversified away by investing in both Home Depot and Performance Food 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 Performance Food 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 Performance Food Group, you can compare the effects of market volatilities on Home Depot and Performance Food 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 Performance Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Performance Food.

Diversification Opportunities for Home Depot and Performance Food

0.95

Correlation Coefficient

Home Depot  Performance Food

Almost no diversification

The 3 months correlation between Home and Performance is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food 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 Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Home Depot i.e., Home Depot and Performance Food go up and down completely randomly.

Pair Corralation between Home Depot and Performance Food

Assuming the 90 days trading horizon The Home Depot is expected to generate 0.87 times more return on investment than Performance Food. However, The Home Depot is 1.15 times less risky than Performance Food. It trades about -0.15 of its potential returns per unit of risk. Performance Food Group is currently generating about -0.13 per unit of risk. If you would invest  37,554  in The Home Depot on December 24, 2024 and sell it today you would lose (5,044) from holding The Home Depot or give up 13.43% of portfolio value over 90 days.

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

The Home Depot  vs.  Performance Food Group

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 fragile performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Performance Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Performance Food Group 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 basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Home Depot and Performance Food

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

The idea behind The Home Depot and Performance Food Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.