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 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
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and Apple is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding 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 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
Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.89 times more return on investment than Apple. However, Home Depot is 1.12 times less risky than Apple. It trades about 0.02 of its potential returns per unit of risk. Apple Inc is currently generating about 0.01 per unit of risk. If you would invest 29,926 in Home Depot on January 24, 2024 and sell it today you would earn a total of 3,685 from holding Home Depot or generate 12.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Apple Inc
Performance |
| Timeline |
| Home Depot |
| Apple Inc |
Home Depot and Apple Volatility Contrast
Predicted Return Density |
| Returns |
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.| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Live Ventures |
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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