Correlation Between Target and Home Depot
Can any of the company-specific risk be diversified away by investing in both Target 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 Target and Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and Home Depot, you can compare the effects of market volatilities on Target 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 Target with a short position of Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Home Depot.
Diversification Opportunities for Target and Home Depot
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Target and Home is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Target and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Target 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 Target 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 Target i.e., Target and Home Depot go up and down completely randomly.
Pair Corralation between Target and Home Depot
Considering the 90-day investment horizon Target is expected to under-perform the Home Depot. In addition to that, Target is 1.59 times more volatile than Home Depot. It trades about -0.01 of its total potential returns per unit of risk. Home Depot is currently generating about 0.03 per unit of volatility. If you would invest 28,389 in Home Depot on January 25, 2024 and sell it today you would earn a total of 5,511 from holding Home Depot or generate 19.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target vs. Home Depot
Performance |
| Timeline |
| Target |
| Home Depot |
Target and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target and Home Depot
The main advantage of trading using opposite Target and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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.| Target vs. Big Lots | Target vs. Aquagold International | Target vs. Thrivent High Yield | Target vs. Morningstar Unconstrained Allocation |
| Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Kirklands | Home Depot vs. Live Ventures |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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