Correlation Between Visa and Home Depot

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Visa and Home Depot 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 Visa and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Home Depot, you can compare the effects of market volatilities on Visa and Home Depot 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 Visa with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Home Depot.

Diversification Opportunities for Visa and Home Depot

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Visa and Home is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Visa 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 Visa Class A are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Visa i.e., Visa and Home Depot go up and down completely randomly.

Pair Corralation between Visa and Home Depot

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Home Depot. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.36 times less risky than Home Depot. The stock trades about -0.07 of its potential returns per unit of risk. The Home Depot is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  37,333  in Home Depot on December 29, 2023 and sell it today you would earn a total of  1,027  from holding Home Depot or generate 2.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Visa Class A  vs.  Home Depot

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Home Depot 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Visa and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and Home Depot

The main advantage of trading using opposite Visa and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.
The idea behind Visa Class A and Home Depot 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

Other Complementary Tools

Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
AI Investment Finder
Use AI to screen and filter profitable investment opportunities
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Analyst Advice
Analyst recommendations and target price estimates broken down by several categories
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Price Transformation
Use Price Transformation models to analyze the depth of different equity instruments across global markets
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum
Bonds Directory
Find actively traded corporate debentures issued by US companies