Correlation Between Home Depot and AKA Brands
Can any of the company-specific risk be diversified away by investing in both Home Depot and AKA Brands 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 AKA Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and AKA Brands Holding, you can compare the effects of market volatilities on Home Depot and AKA Brands 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 AKA Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and AKA Brands.
Diversification Opportunities for Home Depot and AKA Brands
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and AKA is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and AKA Brands Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKA Brands Holding 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 AKA Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKA Brands Holding has no effect on the direction of Home Depot i.e., Home Depot and AKA Brands go up and down completely randomly.
Pair Corralation between Home Depot and AKA Brands
Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the AKA Brands. But the stock apears to be less risky and, when comparing its historical volatility, Home Depot is 6.27 times less risky than AKA Brands. The stock trades about -0.12 of its potential returns per unit of risk. The AKA Brands Holding is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 902.00 in AKA Brands Holding on March 12, 2024 and sell it today you would earn a total of 798.00 from holding AKA Brands Holding or generate 88.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Home Depot vs. AKA Brands Holding
Performance |
Timeline |
Home Depot |
AKA Brands Holding |
Home Depot and AKA Brands Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and AKA Brands
The main advantage of trading using opposite Home Depot and AKA Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, AKA Brands 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 AKA Brands will offset losses from the drop in AKA Brands' long position.Home Depot vs. OReilly Automotive | Home Depot vs. Kosmos Energy | Home Depot vs. Knight Transportation | Home Depot vs. Glacier Bancorp |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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