Correlation Between Home Depot and ConocoPhillips
Can any of the company-specific risk be diversified away by investing in both Home Depot and ConocoPhillips 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 ConocoPhillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and ConocoPhillips, you can compare the effects of market volatilities on Home Depot and ConocoPhillips 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 ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and ConocoPhillips.
Diversification Opportunities for Home Depot and ConocoPhillips
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Home and ConocoPhillips is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Home Depot i.e., Home Depot and ConocoPhillips go up and down completely randomly.
Pair Corralation between Home Depot and ConocoPhillips
Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the ConocoPhillips. In addition to that, Home Depot is 1.66 times more volatile than ConocoPhillips. It trades about -0.45 of its total potential returns per unit of risk. ConocoPhillips is currently generating about 0.18 per unit of volatility. If you would invest 12,623 in ConocoPhillips on January 25, 2024 and sell it today you would earn a total of 361.00 from holding ConocoPhillips or generate 2.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Home Depot vs. ConocoPhillips
Performance |
Timeline |
Home Depot |
ConocoPhillips |
Home Depot and ConocoPhillips Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Home Depot and ConocoPhillips
The main advantage of trading using opposite Home Depot and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' long position.Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Live Ventures |
ConocoPhillips vs. Diamondback Energy | ConocoPhillips vs. Pioneer Natural Resources | ConocoPhillips vs. APA Corporation | ConocoPhillips vs. Hess Corporation |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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