Correlation Between Home Depot and MicroStrategy Incorporated

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

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

Diversification Opportunities for Home Depot and MicroStrategy Incorporated

-0.78

Correlation Coefficient

Home Depot  MicroStrategy Incorporated

Pay attention - limited upside

The 3 months correlation between Home and MicroStrategy is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and MicroStrategy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroStrategy Incorporated 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 The Home Depot are associated (or correlated) with MicroStrategy Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroStrategy Incorporated has no effect on the direction of Home Depot i.e., Home Depot and MicroStrategy Incorporated go up and down completely randomly.

Pair Corralation between Home Depot and MicroStrategy Incorporated

Allowing for the 90-day total investment horizon The Home Depot is expected to generate 0.37 times more return on investment than MicroStrategy Incorporated. However, The Home Depot is 2.67 times less risky than MicroStrategy Incorporated. It trades about 0.06 of its potential returns per unit of risk. MicroStrategy Incorporated is currently generating about -0.1 per unit of risk. If you would invest  37,119  in The Home Depot on July 10, 2025 and sell it today you would earn a total of  1,562  from holding The Home Depot or generate 4.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

The Home Depot  vs.  MicroStrategy Incorporated

Home Depot

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in The Home Depot are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

MicroStrategy Incorporated

Risk-Adjusted Performance

Weakest

Over the last 90 days MicroStrategy Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in November 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Home Depot and MicroStrategy Incorporated

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

The idea behind The Home Depot and MicroStrategy Incorporated 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.