Correlation Between Home Depot and Walmart
Can any of the company-specific risk be diversified away by investing in both Home Depot and Walmart 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 Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Walmart, you can compare the effects of market volatilities on Home Depot and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Walmart.
Diversification Opportunities for Home Depot and Walmart
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Walmart is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Home Depot i.e., Home Depot and Walmart go up and down completely randomly.
Pair Corralation between Home Depot and Walmart
Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Walmart. In addition to that, Home Depot is 1.67 times more volatile than Walmart. It trades about -0.49 of its total potential returns per unit of risk. Walmart is currently generating about -0.07 per unit of volatility. If you would invest 6,057 in Walmart on January 25, 2024 and sell it today you would lose (77.00) from holding Walmart or give up 1.27% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Home Depot vs. Walmart
Performance |
Timeline |
Home Depot |
Walmart |
Home Depot and Walmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and Walmart
The main advantage of trading using opposite Home Depot and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.Home Depot vs. Floor Decor Holdings | Home Depot vs. LL Flooring Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies |
Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Big Lots |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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