Correlation Between Ford and Home Depot

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

Diversification Opportunities for Ford and Home Depot

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ford and Home Depot is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Ford 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 Ford Motor 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 Ford i.e., Ford and Home Depot go up and down completely randomly.

Pair Corralation between Ford and Home Depot

Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.22 times more return on investment than Home Depot. However, Ford is 2.22 times more volatile than Home Depot. It trades about 0.18 of its potential returns per unit of risk. Home Depot is currently generating about 0.14 per unit of risk. If you would invest  1,275  in Ford Motor on May 11, 2022 and sell it today you would earn a total of  303.00  from holding Ford Motor or generate 23.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy97.56%
ValuesDaily Returns

Ford Motor  vs.  Home Depot

 Performance (%) 
       Timeline  
Ford Motor 
Ford Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish technical and fundamental indicators, Ford exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ford Price Channel

Home Depot 
Home Depot Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Home Depot may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Home Depot Price Channel

Ford and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Home Depot

The main advantage of trading using opposite Ford and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

Other Complementary Tools

Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Go
Risk-Return Analysis
View associations between returns expected from investment and the risk you assume
Go
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Go
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Go
CEO Directory
Screen CEOs from public companies around the world
Go
Shere Portfolio
Track or share privately all of your investments from the convenience of any device
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Go