Correlation Between American Homes and AMG Advanced
Can any of the company-specific risk be diversified away by investing in both American Homes and AMG Advanced 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 AMG Advanced 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 AMG Advanced Metallurgical, you can compare the effects of market volatilities on American Homes and AMG Advanced 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 AMG Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and AMG Advanced.
Diversification Opportunities for American Homes and AMG Advanced
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and AMG is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu 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 AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of American Homes i.e., American Homes and AMG Advanced go up and down completely randomly.
Pair Corralation between American Homes and AMG Advanced
Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.52 times more return on investment than AMG Advanced. However, American Homes 4 is 1.93 times less risky than AMG Advanced. It trades about 0.03 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about -0.05 per unit of risk. If you would invest 3,070 in American Homes 4 on November 28, 2024 and sell it today you would earn a total of 456.00 from holding American Homes 4 or generate 14.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.34% |
| Values | Daily Returns |
American Homes 4 vs. AMG Advanced Metallurgical
Performance |
| Timeline |
| American Homes 4 |
| AMG Advanced Metallu |
American Homes and AMG Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and AMG Advanced
The main advantage of trading using opposite American Homes and AMG Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, AMG Advanced 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 AMG Advanced will offset losses from the drop in AMG Advanced's long position.| American Homes vs. Systemair AB | American Homes vs. Tetragon Financial Group | American Homes vs. Nordic Semiconductor ASA | American Homes vs. Sparebank 1 SR |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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