Correlation Between Home Depot and Wells Fargo

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

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

Diversification Opportunities for Home Depot and Wells Fargo

-0.31
  Correlation Coefficient
Home Depot
Wells Fargo International

Very good diversification

The 3 months correlation between Home Depot and Wells is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Wells Fargo International in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo International 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo International has no effect on the direction of Home Depot i.e., Home Depot and Wells Fargo go up and down completely randomly.

Pair Corralation between Home Depot and Wells Fargo

Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.45 times more return on investment than Wells Fargo. However, Home Depot is 1.45 times more volatile than Wells Fargo International. It trades about 0.26 of its potential returns per unit of risk. Wells Fargo International is currently generating about -0.18 per unit of risk. If you would invest  32,774  in Home Depot on September 2, 2021 and sell it today you would earn a total of  7,287  from holding Home Depot or generate 22.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Home Depot  vs.  Wells Fargo International

 Performance (%) 
      Timeline 
Home Depot 
Home Depot Performance
18 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.

Home Depot Price Channel

Wells Fargo International 
Wells Performance
0 of 100
Over the last 90 days Wells Fargo International has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Home Depot and Wells Fargo Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Home Depot and Wells Fargo

The main advantage of trading using opposite Home Depot and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.
The idea behind Home Depot and Wells Fargo International 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.
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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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