Correlation Between Chevron Corp and Home Depot
Can any of the company-specific risk be diversified away by investing in both Chevron Corp 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 Chevron Corp and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Home Depot, you can compare the effects of market volatilities on Chevron Corp 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 Chevron Corp with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Home Depot.
Diversification Opportunities for Chevron Corp and Home Depot
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chevron and Home is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Chevron Corp 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 Chevron Corp 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 Chevron Corp i.e., Chevron Corp and Home Depot go up and down completely randomly.
Pair Corralation between Chevron Corp and Home Depot
Considering the 90-day investment horizon Chevron Corp is expected to generate 0.6 times more return on investment than Home Depot. However, Chevron Corp is 1.67 times less risky than Home Depot. It trades about 0.26 of its potential returns per unit of risk. Home Depot is currently generating about -0.49 per unit of risk. If you would invest 15,647 in Chevron Corp on January 25, 2024 and sell it today you would earn a total of 695.00 from holding Chevron Corp or generate 4.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron Corp vs. Home Depot
Performance |
| Timeline |
| Chevron Corp |
| Home Depot |
Chevron Corp and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Home Depot
The main advantage of trading using opposite Chevron Corp and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp 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.| Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Petroleo Brasileiro Petrobras | Chevron Corp vs. Suncor Energy |
| 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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