Correlation Between Home Depot and FNB Corp

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

Diversification Opportunities for Home Depot and FNB Corp

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Home Depot and FNB Corp is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and FNB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Corp 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 FNB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Corp has no effect on the direction of Home Depot i.e., Home Depot and FNB Corp go up and down completely randomly.

Pair Corralation between Home Depot and FNB Corp

Allowing for the 90-day total investment horizon Home Depot is expected to generate 7.18 times less return on investment than FNB Corp. But when comparing it to its historical volatility, Home Depot is 1.37 times less risky than FNB Corp. It trades about 0.01 of its potential returns per unit of risk. FNB Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  691.00  in FNB Corp on July 8, 2022 and sell it today you would earn a total of  557.00  from holding FNB Corp or generate 80.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  FNB Corp

 Performance (%) 
       Timeline  
Home Depot 
Home Depot Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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

FNB Corp 
FNB Corp Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in FNB Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, FNB Corp may actually be approaching a critical reversion point that can send shares even higher in November 2022.

FNB Corp Price Channel

Home Depot and FNB Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and FNB Corp

The main advantage of trading using opposite Home Depot and FNB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, FNB Corp 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 FNB Corp will offset losses from the drop in FNB Corp's long position.
Home Depot vs. Amazon Inc
The idea behind Home Depot and FNB Corp 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.
FNB Corp 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 CEO Directory module to screen CEOs from public companies around the world.

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