Correlation Between American Homes and SoftBank Group
Can any of the company-specific risk be diversified away by investing in both American Homes and SoftBank Group 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 SoftBank Group 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 SoftBank Group Corp, you can compare the effects of market volatilities on American Homes and SoftBank Group 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 SoftBank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and SoftBank Group.
Diversification Opportunities for American Homes and SoftBank Group
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and SoftBank is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and SoftBank Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftBank Group Corp 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 SoftBank Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftBank Group Corp has no effect on the direction of American Homes i.e., American Homes and SoftBank Group go up and down completely randomly.
Pair Corralation between American Homes and SoftBank Group
Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.46 times more return on investment than SoftBank Group. However, American Homes 4 is 2.16 times less risky than SoftBank Group. It trades about 0.32 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.07 per unit of risk. If you would invest 3,520 in American Homes 4 on September 5, 2024 and sell it today you would earn a total of 248.00 from holding American Homes 4 or generate 7.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 77.27% |
| Values | Daily Returns |
American Homes 4 vs. SoftBank Group Corp
Performance |
| Timeline |
| American Homes 4 |
| SoftBank Group Corp |
American Homes and SoftBank Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and SoftBank Group
The main advantage of trading using opposite American Homes and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, SoftBank Group 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 SoftBank Group will offset losses from the drop in SoftBank Group's long position.| American Homes vs. Axway Software SA | American Homes vs. Public Storage | American Homes vs. Telecom Italia SpA | American Homes vs. Orient Telecoms |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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