Correlation Between Home Depot and Dupont Denemours

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

Diversification Opportunities for Home Depot and Dupont Denemours

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Home Depot and Dupont is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Dupont Denemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont Denemours 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 Dupont Denemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont Denemours has no effect on the direction of Home Depot i.e., Home Depot and Dupont Denemours go up and down completely randomly.

Pair Corralation between Home Depot and Dupont Denemours

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.99 times more return on investment than Dupont Denemours. However, Home Depot is 1.01 times less risky than Dupont Denemours. It trades about -0.03 of its potential returns per unit of risk. Dupont Denemours is currently generating about -0.06 per unit of risk. If you would invest  28,954  in Home Depot on July 6, 2022 and sell it today you would lose (584.00)  from holding Home Depot or give up 2.02% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  Dupont Denemours

 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Depot Price Channel

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

Dupont Price Channel

Home Depot and Dupont Denemours Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and Dupont Denemours

The main advantage of trading using opposite Home Depot and Dupont Denemours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Dupont Denemours 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 Dupont Denemours will offset losses from the drop in Dupont Denemours' long position.
Home Depot vs. Amazon Inc
The idea behind Home Depot and Dupont Denemours 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.
Dupont Denemours vs. Amazon Inc
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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