Correlation Between American Homes and Qurate Retail
Can any of the company-specific risk be diversified away by investing in both American Homes and Qurate Retail 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 American Homes and Qurate Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Homes 4 and Qurate Retail Series, you can compare the effects of market volatilities on American Homes and Qurate Retail 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 American Homes with a short position of Qurate Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Qurate Retail.
Diversification Opportunities for American Homes and Qurate Retail
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Qurate is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Qurate Retail Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qurate Retail Series and American Homes 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 American Homes 4 are associated (or correlated) with Qurate Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qurate Retail Series has no effect on the direction of American Homes i.e., American Homes and Qurate Retail go up and down completely randomly.
Pair Corralation between American Homes and Qurate Retail
Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.23 times more return on investment than Qurate Retail. However, American Homes 4 is 4.36 times less risky than Qurate Retail. It trades about 0.03 of its potential returns per unit of risk. Qurate Retail Series is currently generating about -0.04 per unit of risk. If you would invest 3,236 in American Homes 4 on September 19, 2024 and sell it today you would earn a total of 482.00 from holding American Homes 4 or generate 14.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 86.31% |
| Values | Daily Returns |
American Homes 4 vs. Qurate Retail Series
Performance |
| Timeline |
| American Homes 4 |
| Qurate Retail Series |
American Homes and Qurate Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Qurate Retail
The main advantage of trading using opposite American Homes and Qurate Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Qurate Retail 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 Qurate Retail will offset losses from the drop in Qurate Retail's long position.| American Homes vs. Samsung Electronics Co | American Homes vs. Samsung Electronics Co | American Homes vs. Hyundai Motor | American Homes vs. Reliance Industries Ltd |
| Qurate Retail vs. Samsung Electronics Co | Qurate Retail vs. Samsung Electronics Co | Qurate Retail vs. Hyundai Motor | Qurate Retail vs. Reliance Industries Ltd |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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