Correlation Between American Homes and Air Products
Can any of the company-specific risk be diversified away by investing in both American Homes and Air Products 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 Air Products 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 Air Products Chemicals, you can compare the effects of market volatilities on American Homes and Air Products 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 Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Air Products.
Diversification Opportunities for American Homes and Air Products
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Air is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of American Homes i.e., American Homes and Air Products go up and down completely randomly.
Pair Corralation between American Homes and Air Products
Assuming the 90 days trading horizon American Homes 4 is expected to under-perform the Air Products. But the stock apears to be less risky and, when comparing its historical volatility, American Homes 4 is 1.42 times less risky than Air Products. The stock trades about -0.03 of its potential returns per unit of risk. The Air Products Chemicals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 31,186 in Air Products Chemicals on September 14, 2024 and sell it today you would lose (115.00) from holding Air Products Chemicals or give up 0.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Homes 4 vs. Air Products Chemicals
Performance |
| Timeline |
| American Homes 4 |
| Air Products Chemicals |
American Homes and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Air Products
The main advantage of trading using opposite American Homes and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| American Homes vs. European Metals Holdings | American Homes vs. Omega Healthcare Investors | American Homes vs. Empire Metals Limited | American Homes vs. Induction Healthcare Group |
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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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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