Correlation Between American Homes and CAP LEASE
Can any of the company-specific risk be diversified away by investing in both American Homes and CAP LEASE 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 CAP LEASE 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 CAP LEASE AVIATION, you can compare the effects of market volatilities on American Homes and CAP LEASE 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 CAP LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and CAP LEASE.
Diversification Opportunities for American Homes and CAP LEASE
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and CAP is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and CAP LEASE AVIATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAP LEASE AVIATION 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 CAP LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAP LEASE AVIATION has no effect on the direction of American Homes i.e., American Homes and CAP LEASE go up and down completely randomly.
Pair Corralation between American Homes and CAP LEASE
Assuming the 90 days trading horizon American Homes is expected to generate 32.77 times less return on investment than CAP LEASE. But when comparing it to its historical volatility, American Homes 4 is 4.46 times less risky than CAP LEASE. It trades about 0.02 of its potential returns per unit of risk. CAP LEASE AVIATION is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 50.00 in CAP LEASE AVIATION on November 28, 2024 and sell it today you would earn a total of 9.00 from holding CAP LEASE AVIATION or generate 18.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Homes 4 vs. CAP LEASE AVIATION
Performance |
| Timeline |
| American Homes 4 |
| CAP LEASE AVIATION |
American Homes and CAP LEASE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and CAP LEASE
The main advantage of trading using opposite American Homes and CAP LEASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, CAP LEASE 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 CAP LEASE will offset losses from the drop in CAP LEASE'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 |
| CAP LEASE vs. Arrow Electronics | CAP LEASE vs. Solstad Offshore ASA | CAP LEASE vs. Ruffer Investment | CAP LEASE vs. Kinnevik Investment AB |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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