Correlation Between American Homes and Bytes Technology
Can any of the company-specific risk be diversified away by investing in both American Homes and Bytes Technology 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 Bytes Technology 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 Bytes Technology, you can compare the effects of market volatilities on American Homes and Bytes Technology 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 Bytes Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Bytes Technology.
Diversification Opportunities for American Homes and Bytes Technology
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Bytes is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Bytes Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bytes Technology 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 Bytes Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bytes Technology has no effect on the direction of American Homes i.e., American Homes and Bytes Technology go up and down completely randomly.
Pair Corralation between American Homes and Bytes Technology
Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.64 times more return on investment than Bytes Technology. However, American Homes 4 is 1.55 times less risky than Bytes Technology. It trades about 0.08 of its potential returns per unit of risk. Bytes Technology is currently generating about -0.05 per unit of risk. If you would invest 3,786 in American Homes 4 on August 30, 2024 and sell it today you would earn a total of 91.00 from holding American Homes 4 or generate 2.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. Bytes Technology
Performance |
| Timeline |
| American Homes 4 |
| Bytes Technology |
American Homes and Bytes Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Bytes Technology
The main advantage of trading using opposite American Homes and Bytes Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Bytes Technology 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 Bytes Technology will offset losses from the drop in Bytes Technology's long position.| American Homes vs. Oakley Capital Investments | American Homes vs. Intuitive Investments Group | American Homes vs. Amedeo Air Four | American Homes vs. Monks Investment Trust |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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