Correlation Between Home Depot and Comcast Corp

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

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

Diversification Opportunities for Home Depot and Comcast Corp

0.15

Correlation Coefficient

Home Depot  Comcast Corp

Average diversification

The 3 months correlation between Home and Comcast is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Comcast Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comcast Corp 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 Comcast Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comcast Corp has no effect on the direction of Home Depot i.e., Home Depot and Comcast Corp go up and down completely randomly.

Pair Corralation between Home Depot and Comcast Corp

Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Comcast Corp. In addition to that, Home Depot is 1.5 times more volatile than Comcast Corp. It trades about -0.46 of its total potential returns per unit of risk. Comcast Corp is currently generating about -0.36 per unit of volatility. If you would invest  4,278  in Comcast Corp on January 20, 2024 and sell it today you would lose (316.00) from holding Comcast Corp or give up 7.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Home Depot  vs.  Comcast Corp

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 rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Comcast Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Comcast Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Home Depot and Comcast Corp

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

The idea behind Home Depot and Comcast Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.