Correlation Between American Homes and Empire Metals
Can any of the company-specific risk be diversified away by investing in both American Homes and Empire Metals 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 Empire Metals 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 Empire Metals Limited, you can compare the effects of market volatilities on American Homes and Empire Metals 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 Empire Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Empire Metals.
Diversification Opportunities for American Homes and Empire Metals
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Empire is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited 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 Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of American Homes i.e., American Homes and Empire Metals go up and down completely randomly.
Pair Corralation between American Homes and Empire Metals
Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.48 times more return on investment than Empire Metals. However, American Homes 4 is 2.09 times less risky than Empire Metals. It trades about 0.33 of its potential returns per unit of risk. Empire Metals Limited is currently generating about -0.26 per unit of risk. If you would invest 3,520 in American Homes 4 on September 3, 2024 and sell it today you would earn a total of 241.00 from holding American Homes 4 or generate 6.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
American Homes 4 vs. Empire Metals Limited
Performance |
| Timeline |
| American Homes 4 |
| Empire Metals Limited |
American Homes and Empire Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Empire Metals
The main advantage of trading using opposite American Homes and Empire Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Empire Metals 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 Empire Metals will offset losses from the drop in Empire Metals' long position.| American Homes vs. AfriTin Mining | American Homes vs. Caledonia Mining | American Homes vs. SilverCrest Metals | American Homes vs. CleanTech Lithium plc |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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