Correlation Between Delek Automotive and Home Depot
Can any of the company-specific risk be diversified away by investing in both Delek Automotive 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 Delek Automotive and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Delek Automotive Systems and Home Depot, you can compare the effects of market volatilities on Delek Automotive 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 Delek Automotive with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delek Automotive and Home Depot.
Diversification Opportunities for Delek Automotive and Home Depot
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Delek and Home is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Delek Automotive Systems and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Delek Automotive 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 Delek Automotive Systems 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 Delek Automotive i.e., Delek Automotive and Home Depot go up and down completely randomly.
Pair Corralation between Delek Automotive and Home Depot
Assuming the 90 days trading horizon Delek Automotive Systems is expected to under-perform the Home Depot. In addition to that, Delek Automotive is 2.59 times more volatile than Home Depot. It trades about -0.05 of its total potential returns per unit of risk. Home Depot is currently generating about -0.07 per unit of volatility. If you would invest 35,319 in Home Depot on January 26, 2024 and sell it today you would lose (2,018) from holding Home Depot or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 77.42% |
| Values | Daily Returns |
Delek Automotive Systems vs. Home Depot
Performance |
| Timeline |
| Delek Automotive Systems |
| Home Depot |
Delek Automotive and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delek Automotive and Home Depot
The main advantage of trading using opposite Delek Automotive and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Automotive 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.| Delek Automotive vs. Clal Insurance Enterprises | Delek Automotive vs. Israel Discount Bank | Delek Automotive vs. Bezeq Israeli Telecommunication | Delek Automotive vs. Alony Hetz Properties |
| 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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