Correlation Between Home Depot and Twitter

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

Diversification Opportunities for Home Depot and Twitter

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Home Depot and Twitter is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Twitter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twitter 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 Twitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twitter has no effect on the direction of Home Depot i.e., Home Depot and Twitter go up and down completely randomly.

Pair Corralation between Home Depot and Twitter

Allowing for the 90-day total investment horizon Home Depot is expected to generate 2.02 times less return on investment than Twitter. But when comparing it to its historical volatility, Home Depot is 2.08 times less risky than Twitter. It trades about 0.01 of its potential returns per unit of risk. Twitter is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,731  in Twitter on June 26, 2022 and sell it today you would lose (573.00)  from holding Twitter or give up 12.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  Twitter

 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

Twitter 
Twitter Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Twitter are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Twitter may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Twitter Price Channel

Home Depot and Twitter Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and Twitter

The main advantage of trading using opposite Home Depot and Twitter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Twitter 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 Twitter will offset losses from the drop in Twitter's long position.
Home Depot vs. Industrias Bachoco SA
The idea behind Home Depot and Twitter 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.
Twitter vs. Industrias Bachoco SA
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

Other Complementary Tools

Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go
Commodity Channel Index
Use Commodity Channel Index to analyze current equity momentum
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go