Correlation Between Home Depot and Intel

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

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

Diversification Opportunities for Home Depot and Intel

0.21

Correlation Coefficient

Home Depot  Intel

Modest diversification

The 3 months correlation between Home and Intel is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Home Depot i.e., Home Depot and Intel go up and down completely randomly.

Pair Corralation between Home Depot and Intel

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.58 times more return on investment than Intel. However, Home Depot is 1.73 times less risky than Intel. It trades about -0.39 of its potential returns per unit of risk. Intel is currently generating about -0.31 per unit of risk. If you would invest  37,941  in Home Depot on January 19, 2024 and sell it today you would lose (4,652) from holding Home Depot or give up 12.26% of portfolio value over 90 days.

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

Home Depot  vs.  Intel

Home Depot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Home Depot and Intel

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

The idea behind Home Depot and Intel 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.