Correlation Between Foot Locker and Home Depot
Can any of the company-specific risk be diversified away by investing in both Foot Locker and Home Depot 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 Foot Locker and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foot Locker and Home Depot, you can compare the effects of market volatilities on Foot Locker and Home Depot 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 Foot Locker with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and Home Depot.
Diversification Opportunities for Foot Locker and Home Depot
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Foot and Home is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Foot Locker 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 Foot Locker are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Foot Locker i.e., Foot Locker and Home Depot go up and down completely randomly.
Pair Corralation between Foot Locker and Home Depot
Allowing for the 90-day total investment horizon Foot Locker is expected to under-perform the Home Depot. In addition to that, Foot Locker is 1.98 times more volatile than Home Depot. It trades about -0.47 of its total potential returns per unit of risk. Home Depot is currently generating about -0.5 per unit of volatility. If you would invest 38,360 in Home Depot on January 28, 2024 and sell it today you would lose (4,851) from holding Home Depot or give up 12.65% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Foot Locker vs. Home Depot
Performance |
Timeline |
Foot Locker |
Home Depot |
Foot Locker and Home Depot Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Foot Locker and Home Depot
The main advantage of trading using opposite Foot Locker and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.Foot Locker vs. Abercrombie Fitch | Foot Locker vs. Gap Inc | Foot Locker vs. Urban Outfitters | Foot Locker vs. Childrens Place |
Home Depot vs. Floor Decor Holdings | Home Depot vs. LL Flooring Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies |
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 the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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 | |
Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |