Correlation Between American Homes and Poxel SA
Can any of the company-specific risk be diversified away by investing in both American Homes and Poxel SA 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 Poxel SA 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 Poxel SA, you can compare the effects of market volatilities on American Homes and Poxel SA 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 Poxel SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Poxel SA.
Diversification Opportunities for American Homes and Poxel SA
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Poxel is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Poxel SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poxel SA 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 Poxel SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poxel SA has no effect on the direction of American Homes i.e., American Homes and Poxel SA go up and down completely randomly.
Pair Corralation between American Homes and Poxel SA
Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.27 times more return on investment than Poxel SA. However, American Homes 4 is 3.65 times less risky than Poxel SA. It trades about 0.05 of its potential returns per unit of risk. Poxel SA is currently generating about -0.04 per unit of risk. If you would invest 3,046 in American Homes 4 on September 3, 2024 and sell it today you would earn a total of 813.00 from holding American Homes 4 or generate 26.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 83.53% |
| Values | Daily Returns |
American Homes 4 vs. Poxel SA
Performance |
| Timeline |
| American Homes 4 |
| Poxel SA |
American Homes and Poxel SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Poxel SA
The main advantage of trading using opposite American Homes and Poxel SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Poxel SA 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 Poxel SA will offset losses from the drop in Poxel SA's long position.| American Homes vs. AfriTin Mining | American Homes vs. Caledonia Mining | American Homes vs. SilverCrest Metals | American Homes vs. CleanTech Lithium plc |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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