Home Depot Stock Volatility

HD -  USA Stock  

USD 285.18  15.77  5.24%

Home Depot holds Efficiency (Sharpe) Ratio of -0.12, which attests that the entity had -0.12% of return per unit of risk over the last 3 months. Macroaxis standpoint towards determining the risk of any stock is to look at both systematic and unsystematic factors of the business, including all available market data and technical indicators. Home Depot exposes twenty-eight different technical indicators, which can help you to evaluate volatility that cannot be diversified away. Please be advised to check out Home Depot market risk adjusted performance of (0.23), and Risk Adjusted Performance of (0.16) to validate the risk estimate we provide.
  
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Home Depot Stock volatility depicts how high the prices fluctuate around the mean (or its average) price. In other words, it is a statistical measure of the distribution of Home Depot daily returns, and it is calculated using variance and standard deviation. We also use Home Depot's beta, its sensitivity to the market, as well as its odds of financial distress to provide a more practical estimation of Home Depot volatility.

720 Days Market Risk

Very steady

Chance of Distress

720 Days Economic Sensitivity

Almost mirrors the market
Since volatility provides investors with entry points to take advantage of stock prices, companies, such as Home Depot can benefit from it. Downward market volatility can be a perfect environment for investors who play the long game. Here, they may decide to buy additional stocks of Home Depot at lower prices. For example, an investor can purchase Home Depot stock that has halved in price over a short period. This will lower your average cost per share, thereby improving your portfolio's performance when the markets normalize. Similarly, when the prices of Home Depot's stock rises, investors can sell out and invest the proceeds in other equities with better opportunities. Investing when markets are volatile with better valuations will accord both investors and companies the opportunity to generate better long-term returns.

Home Depot Market Sensitivity And Downside Risk

Home Depot's beta coefficient measures the volatility of Home Depot stock compared to the systematic risk of the entire stock market represented by your selected benchmark. In mathematical terms, beta represents the slope of the line through a regression of data points where each of these points represents Home Depot stock's returns against your selected market. In other words, Home Depot's beta of 1.2 provides an investor with an approximation of how much risk Home Depot stock can potentially add to one of your existing portfolios.
Let's try to break down what Home Depot's beta means in this case. As the market goes up, the company is expected to outperform it. However, if the market returns are negative, Home Depot will likely underperform.
3 Months Beta |Analyze Home Depot Demand Trend
Check current 90 days Home Depot correlation with market (DOW)

Home Depot Beta

    
  1.2  
Home Depot standard deviation measures the daily dispersion of prices over your selected time horizon relative to its mean. Typical volatile equity has a high standard deviation, while the deviation of a stable instrument is usually low. As a downside, the standard deviation calculates all uncertainty as risk, even when it is in your favor, such as above-average returns.

Standard Deviation

    
  2.36  
It is essential to understand the difference between upside risk (as represented by Home Depot's standard deviation) and the downside risk, which can be measured by semi-deviation or downside deviation of Home Depot stock's daily returns or price. Since the actual investment returns on holding a position in Home Depot stock tend to have a non-normal distribution, there will be different probabilities for losses than for gains. The likelihood of losses is reflected in the downside risk of an investment in Home Depot.

Home Depot Implied Volatility

    
  58.43  
Home Depot's implied volatility exposes the market's sentiment of Home Depot stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Home Depot's implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that Home Depot stock will not fluctuate a lot when Home Depot's options are near their expiration.

Home Depot Stock Volatility Analysis

Volatility refers to the frequency at which Home Depot stock price increases or decreases within a specified period. These fluctuations usually indicate the level of risk that's associated with Home Depot's price changes. Investors will then calculate the volatility of Home Depot's stock to predict their future moves. A stock that has erratic price changes quickly hits new highs, and lows are considered highly volatile. A stock with relatively stable price changes has low volatility. A highly volatile stock is riskier, but the risk cuts both ways. Investing in highly volatile security can either be highly successful, or you may experience significant failure. There are two main types of Home Depot's volatility:

Historical Volatility

This type of stock volatility measures Home Depot's fluctuations based on previous trends. It's commonly used to predict Home Depot's future behavior based on its past. However, it cannot conclusively determine the future direction of the stock.

Implied Volatility

This type of volatility provides a positive outlook on future price fluctuations for Home Depot's current market price. This means that the stock will return to its initially predicted market price.
Transformation
The output start index for this execution was zero with a total number of output elements of sixty-one. Home Depot Average Price is the average of the sum of open, high, low and close daily prices of a bar. It can be used to smooth an indicator that normally takes just the closing price as input.
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Home Depot Projected Return Density Against Market

Allowing for the 90-day total investment horizon the stock has the beta coefficient of 1.1974 . This usually indicates as the benchmark fluctuates upward, the company is expected to outperform it on average. However, if the benchmark returns are projected to be negative, Home Depot will likely underperform.
Most traded equities are subject to two types of risk - systematic (i.e., market) and unsystematic (i.e., nonmarket or company-specific) risk. Unsystematic risk is the risk that events specific to Home Depot or Consumer Cyclical sector will adversely affect the stock's price. This type of risk can be diversified away by owning several different stocks in different industries whose stock prices have shown a small correlation to each other. On the other hand, systematic risk is the risk that Home Depot stock's price will be affected by overall stock market movements and cannot be diversified away. So, no matter how many positions you have, you cannot eliminate market risk. However, you can measure a Home Depot stock's historical response to market movements and buy it if you are comfortable with its volatility direction. Beta and standard deviation are two commonly used measures to help you make the right decision.
The company has a negative alpha, implying that the risk taken by holding this instrument is not justified. Home Depot is significantly underperforming DOW.
 Predicted Return Density 
      Returns 
Home Depot's volatility is measured either by using standard deviation or beta. Standard deviation will reflect the average amount of how Home Depot stock's price will differ from the mean after some time.To get its calculation, you should first determine the mean price during the specified period then subtract that from each price point.

What Drives a Company's Stock Price Volatility?

Several factors can influence a company's stock volatility:

Industry

Specific events can influence volatility within a particular industry. For instance, a significant weather upheaval in a crucial oil-production site may cause oil prices to increase in the oil sector. The direct result will be the rise in the stock price of oil distribution companies. Similarly, any government regulation in a specific industry could negatively influence stock prices due to increased regulations on compliance that may impact the company's future earnings and growth.

Political and Economic environment

When governments make significant decisions regarding trade agreements, policies, and legislation regarding specific industries, they will influence stock prices. Everything from speeches to elections may influence investors, who can directly influence the stock prices in any particular industry. The prevailing economic situation also plays a significant role in stock prices. When the economy is doing well, investors will have a positive reaction and hence, better stock prices and vice versa.

The Company's Performance

Sometimes volatility will only affect an individual company. For example, a revolutionary product launch or strong earnings report may attract many investors to purchase the company. This positive attention will raise the company's stock price. In contrast, product recalls and data breaches may negatively influence a company's stock prices.

Home Depot Stock Risk Measures

Most traded equities are subject to two types of risk - systematic (i.e., market) and unsystematic (i.e., nonmarket or company-specific) risk. Unsystematic risk is the risk that events specific to Home Depot or Consumer Cyclical sector will adversely affect the stock's price. This type of risk can be diversified away by owning several different stocks in different industries whose stock prices have shown a small correlation to each other. On the other hand, systematic risk is the risk that Home Depot stock's price will be affected by overall stock market movements and cannot be diversified away. So, no matter how many positions you have, you cannot eliminate market risk. However, you can measure a Home Depot stock's historical response to market movements and buy it if you are comfortable with its volatility direction. Beta and standard deviation are two commonly used measures to help you make the right decision.
Allowing for the 90-day total investment horizon the coefficient of variation of Home Depot is -849.23. The daily returns are distributed with a variance of 5.57 and standard deviation of 2.36. The mean deviation of Home Depot is currently at 1.84. For similar time horizon, the selected benchmark (DOW) has volatility of 1.36
α
Alpha over DOW
-0.12
β
Beta against DOW1.20
σ
Overall volatility
2.36
Ir
Information ratio -0.07

Home Depot Stock Return Volatility

Home Depot historical daily return volatility represents how much Home Depot stock's price daily returns swing around its mean daily price change - it is a statistical measure of its dispersion of returns. The firm accepts 2.3591% volatility on return distribution over the 90 days horizon. By contrast, DOW inherits 1.3702% risk (volatility on return distribution) over the 90 days horizon.
 Performance (%) 
      Timeline 

About Home Depot Volatility

Volatility is a rate at which the price of Home Depot or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Home Depot may increase or decrease. In other words, similar to Home Depot's beta indicator, it measures the risk of Home Depot and helps estimate the fluctuations that may happen in a short period of time. So if prices of Home Depot fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility.
Please read more on our technical analysis page.
Last ReportedProjected for 2022
Market Capitalization382.8 B354.9 B
The Home Depot, Inc. operates as a home improvement retailer. The Home Depot, Inc. was incorporated in 1978 and is based in Atlanta, Georgia. Home Depot operates under Home Improvement Retail classification in the United States and is traded on New York Stock Exchange. It employs 490600 people.

Nearest Home Depot long CALL Option Payoff at Expiration

Home Depot's implied volatility is one of the determining factors in the pricing options written on Home Depot. Implied volatility approximates the future value of Home Depotusing the option's current value. Options with high implied volatility have higher premiums and can be used to hedge the downside of investing in Home Depot over a specific time period.
View All Home Depot options
2022-05-20 CALL at $165.0 is a CALL option contract on Home Depot's common stock with a strick price of 165.0 expiring on 2022-05-20. The contract was last traded on 2022-05-18 at 09:35:21 for $153.0 and, as of today, has 1 days remaining before the expiration. The option is currently trading at a bid price of $118.95, and an ask price of $120.95. The implied volatility as of the 19th of May is 399.1634.
 Profit 
Share
      Home Depot Price At Expiration 

Home Depot Investment Opportunity

Home Depot has a volatility of 2.36 and is 1.72 times more volatile than DOW. 20  of all equities and portfolios are less risky than Home Depot. Compared to the overall equity markets, volatility of historical daily returns of Home Depot is lower than 20 () of all global equities and portfolios over the last 90 days. Use Home Depot to protect your portfolios against small market fluctuations. The stock experiences a very speculative upward sentiment. Check odds of Home Depot to be traded at $270.92 in 90 days. . Let's try to break down what Home Depot's beta means in this case. As the market goes up, the company is expected to outperform it. However, if the market returns are negative, Home Depot will likely underperform.

Poor diversification

The correlation between Home Depot and DJI is Poor diversification for selected investment horizon. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and DJI in the same portfolio assuming nothing else is changed.

Home Depot Additional Risk Indicators

The analysis of Home Depot's secondary risk indicators is one of the essential steps in making a buy or sell decision. The process involves identifying the amount of risk involved in Home Depot's investment and either accepting that risk or mitigating it. Along with some common measures of Home Depot stock risk such as standard deviation, beta, or value at risk, we also provide a set of secondary indicators that can assist in the individual investment decision or help in hedging the risk of your existing portfolios.
Risk Adjusted Performance(0.16)
Market Risk Adjusted Performance(0.23)
Mean Deviation1.76
Coefficient Of Variation(814.05)
Standard Deviation2.29
Variance5.24
Information Ratio(0.07)
Please note, the risk measures we provide can be used independently or collectively to perform a risk assessment. When comparing two potential stock investments, we recommend comparing similar equities with homogenous growth potential and valuation from related markets to determine which investment holds the most risk.

Home Depot Suggested Diversification Pairs

Pair trading is one of the very effective strategies used by professional day traders and hedge funds capitalizing on short-time and mid-term market inefficiencies. The approach is based on the fact that the ratio of prices of two correlating shares is long-term stable and oscillates around the average value. If the correlation ratio comes outside the common area, you can speculate with a high success rate that the ratio will return to the mean value and collect a profit.
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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Home Depot as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Home Depot's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Home Depot's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Home Depot.
Please check Risk vs Return Analysis. Note that the Home Depot information on this page should be used as a complementary analysis to other Home Depot's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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When running Home Depot price analysis, check to measure Home Depot's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Home Depot is operating at the current time. Most of Home Depot's value examination focuses on studying past and present price action to predict the probability of Home Depot's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move Home Depot's price. Additionally, you may evaluate how the addition of Home Depot to your portfolios can decrease your overall portfolio volatility.
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Is Home Depot's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Home Depot. If investors know Home Depot will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Home Depot listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of Home Depot is measured differently than its book value, which is the value of Home Depot that is recorded on the company's balance sheet. Investors also form their own opinion of Home Depot's value that differs from its market value or its book value, called intrinsic value, which is Home Depot's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Home Depot's market value can be influenced by many factors that don't directly affect Home Depot's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Home Depot's value and its price as these two are different measures arrived at by different means. Investors typically determine Home Depot value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Home Depot's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.