Correlation Between Home Depot and Carvana Co

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Can any of the company-specific risk be diversified away by investing in both Home Depot and Carvana Co 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 Carvana Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Carvana Co Cl, you can compare the effects of market volatilities on Home Depot and Carvana Co 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 Carvana Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Carvana Co.

Diversification Opportunities for Home Depot and Carvana Co

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Home Depot and Carvana is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Carvana Co Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana Co Cl 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 Carvana Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana Co Cl has no effect on the direction of Home Depot i.e., Home Depot and Carvana Co go up and down completely randomly.

Pair Corralation between Home Depot and Carvana Co

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.26 times more return on investment than Carvana Co. However, Home Depot is 3.81 times less risky than Carvana Co. It trades about 0.01 of its potential returns per unit of risk. Carvana Co Cl is currently generating about -0.04 per unit of risk. If you would invest  27,483  in Home Depot on June 26, 2022 and sell it today you would lose (389.00)  from holding Home Depot or give up 1.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Home Depot  vs.  Carvana Co Cl

 Performance (%) 
       Timeline  
Home Depot 
Home Depot Performance
0 of 100
Over the last 90 days Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Depot Price Channel

Carvana Co Cl 
Carvana Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co Cl are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Carvana Co may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Carvana Price Channel

Home Depot and Carvana Co Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and Carvana Co

The main advantage of trading using opposite Home Depot and Carvana Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Carvana Co 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 Carvana Co will offset losses from the drop in Carvana Co's long position.
Home Depot vs. Industrias Bachoco SA
The idea behind Home Depot and Carvana Co Cl 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.
Carvana Co vs. BUSHVELD MINERALS LTD
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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