Correlation Between Home Depot and Hyatt Hotels
Can any of the company-specific risk be diversified away by investing in both Home Depot and Hyatt Hotels 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 Hyatt Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Hyatt Hotels, you can compare the effects of market volatilities on Home Depot and Hyatt Hotels 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 Hyatt Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Hyatt Hotels.
Diversification Opportunities for Home Depot and Hyatt Hotels
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Hyatt is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Hyatt Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyatt Hotels 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 Hyatt Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyatt Hotels has no effect on the direction of Home Depot i.e., Home Depot and Hyatt Hotels go up and down completely randomly.
Pair Corralation between Home Depot and Hyatt Hotels
Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Hyatt Hotels. In addition to that, Home Depot is 1.1 times more volatile than Hyatt Hotels. It trades about -0.49 of its total potential returns per unit of risk. Hyatt Hotels is currently generating about -0.14 per unit of volatility. If you would invest 15,785 in Hyatt Hotels on January 25, 2024 and sell it today you would lose (582.00) from holding Hyatt Hotels or give up 3.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. Hyatt Hotels
Performance |
| Timeline |
| Home Depot |
| Hyatt Hotels |
Home Depot and Hyatt Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Hyatt Hotels
The main advantage of trading using opposite Home Depot and Hyatt Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Hyatt Hotels 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 Hyatt Hotels will offset losses from the drop in Hyatt Hotels' long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. LL Flooring Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies |
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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