Correlation Between Home Depot and ATT

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

Diversification Opportunities for Home Depot and ATT

-0.32
  Correlation Coefficient

Very good diversification

The 24 months correlation between Home Depot and ATT is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Home Depot i.e., Home Depot and ATT go up and down completely randomly.

Pair Corralation between Home Depot and ATT

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.06 times more return on investment than ATT. However, Home Depot is 1.06 times more volatile than ATT Inc. It trades about 0.03 of its potential returns per unit of risk. ATT Inc is currently generating about 0.0 per unit of risk. If you would invest  27,449  in Home Depot on May 16, 2022 and sell it today you would earn a total of  4,040  from holding Home Depot or generate 14.72% return on investment over 90 days.
Time Period24 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  ATT Inc

 Performance (%) 
       Timeline  
Home Depot 
Home Depot Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 1 (%) 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

ATT Inc 
ATT Performance
0 of 100
Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ATT is not utilizing all of its potentials. The new stock price uproar, may contribute to short-horizon losses for the private investors.

ATT Price Channel

Home Depot and ATT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and ATT

The main advantage of trading using opposite Home Depot and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.
The idea behind Home Depot and ATT Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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