Correlation Between Ameriprise Financial and Home Depot

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

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

Diversification Opportunities for Ameriprise Financial and Home Depot

0.49

Correlation Coefficient

Ameriprise Financial  Home Depot

Very weak diversification

The 3 months correlation between Ameriprise and Home is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Ameriprise Financial 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 Ameriprise Financial 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 Ameriprise Financial i.e., Ameriprise Financial and Home Depot go up and down completely randomly.

Pair Corralation between Ameriprise Financial and Home Depot

Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 10.57 times more return on investment than Home Depot. However, Ameriprise Financial is 10.57 times more volatile than Home Depot. It trades about 0.21 of its potential returns per unit of risk. Home Depot is currently generating about 0.13 per unit of risk. If you would invest  44,246  in Ameriprise Financial on September 14, 2024 and sell it today you would earn a total of  10,498  from holding Ameriprise Financial or generate 23.73% return on investment over 90 days.

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

Ameriprise Financial  vs.  Home Depot

Ameriprise Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ameriprise Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Home Depot

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Home Depot is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ameriprise Financial and Home Depot

The main advantage of trading using opposite Ameriprise Financial and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial 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.

The idea behind Ameriprise Financial and Home Depot 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.