Correlation Between Home Depot and Micron Technology
Can any of the company-specific risk be diversified away by investing in both Home Depot and Micron Technology 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 Micron Technology 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 Micron Technology, you can compare the effects of market volatilities on Home Depot and Micron Technology 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 Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Micron Technology.
Diversification Opportunities for Home Depot and Micron Technology
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Home and Micron is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Home Depot i.e., Home Depot and Micron Technology go up and down completely randomly.
Pair Corralation between Home Depot and Micron Technology
Assuming the 90 days trading horizon The Home Depot is expected to under-perform the Micron Technology. But the stock apears to be less risky and, when comparing its historical volatility, The Home Depot is 1.74 times less risky than Micron Technology. The stock trades about -0.1 of its potential returns per unit of risk. The Micron Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 8,902 in Micron Technology on December 30, 2024 and sell it today you would lose (480.00) from holding Micron Technology or give up 5.39% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
The Home Depot vs. Micron Technology
Performance |
Timeline |
Home Depot |
Micron Technology |
Home Depot and Micron Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and Micron Technology
The main advantage of trading using opposite Home Depot and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology's long position.Home Depot vs. Spotify Technology SA | Home Depot vs. Check Point Software | Home Depot vs. Keysight Technologies, | Home Depot vs. Lumen Technologies, |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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