Correlation Between Home Depot and Telefnica

Can any of the company-specific risk be diversified away by investing in both Home Depot and Telefnica 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 Telefnica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Home Depot and Telefnica SA, you can compare the effects of market volatilities on Home Depot and Telefnica 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 Telefnica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Telefnica.

Diversification Opportunities for Home Depot and Telefnica

-0.41

Correlation Coefficient

Home Depot  Telefnica

Very good diversification

The 3 months correlation between Home and Telefnica is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA 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 The Home Depot are associated (or correlated) with Telefnica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica SA has no effect on the direction of Home Depot i.e., Home Depot and Telefnica go up and down completely randomly.

Pair Corralation between Home Depot and Telefnica

Assuming the 90 days horizon The Home Depot is expected to under-perform the Telefnica. In addition to that, Home Depot is 1.17 times more volatile than Telefnica SA. It trades about 0.0 of its total potential returns per unit of risk. Telefnica SA is currently generating about 0.13 per unit of volatility. If you would invest  8,996  in Telefnica SA on April 5, 2025 and sell it today you would earn a total of  769.00  from holding Telefnica SA or generate 8.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Home Depot  vs.  Telefnica SA

Home Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Home Depot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Telefnica SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telefnica SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Telefnica may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Home Depot and Telefnica

The main advantage of trading using opposite Home Depot and Telefnica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Telefnica 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 Telefnica will offset losses from the drop in Telefnica's long position.

The idea behind The Home Depot and Telefnica SA 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.

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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 Positions Ratings module to 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.