Correlation Between Home Depot and Parts ID

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

Diversification Opportunities for Home Depot and Parts ID

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Home Depot and Parts is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Parts ID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parts ID 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 Parts ID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parts ID has no effect on the direction of Home Depot i.e., Home Depot and Parts ID go up and down completely randomly.

Pair Corralation between Home Depot and Parts ID

Allowing for the 90-day total investment horizon Home Depot is expected to generate 8.67 times less return on investment than Parts ID. But when comparing it to its historical volatility, Home Depot is 7.31 times less risky than Parts ID. It trades about 0.27 of its potential returns per unit of risk. Parts ID is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Parts ID on May 18, 2022 and sell it today you would earn a total of  78.00  from holding Parts ID or generate 76.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Home Depot  vs.  Parts ID

 Performance (%) 
       Timeline  
Home Depot 
Home Depot Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting 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

Parts ID 
Parts Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Parts ID are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Parts ID exhibited solid returns over the last few months and may actually be approaching a breakup point.

Parts Price Channel

Home Depot and Parts ID Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and Parts ID

The main advantage of trading using opposite Home Depot and Parts ID positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Parts ID 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 Parts ID will offset losses from the drop in Parts ID's long position.
The idea behind Home Depot and Parts ID 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

Other Complementary Tools

Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Fund Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Go
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go