Correlation Between American Homes and Gaming Realms
Can any of the company-specific risk be diversified away by investing in both American Homes and Gaming Realms 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 Gaming Realms 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 Gaming Realms plc, you can compare the effects of market volatilities on American Homes and Gaming Realms 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 Gaming Realms. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Gaming Realms.
Diversification Opportunities for American Homes and Gaming Realms
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Gaming is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Gaming Realms plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming Realms plc 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 Gaming Realms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming Realms plc has no effect on the direction of American Homes i.e., American Homes and Gaming Realms go up and down completely randomly.
Pair Corralation between American Homes and Gaming Realms
Assuming the 90 days trading horizon American Homes is expected to generate 3.1 times less return on investment than Gaming Realms. But when comparing it to its historical volatility, American Homes 4 is 1.77 times less risky than Gaming Realms. It trades about 0.02 of its potential returns per unit of risk. Gaming Realms plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,780 in Gaming Realms plc on October 28, 2024 and sell it today you would earn a total of 880.00 from holding Gaming Realms plc or generate 31.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 87.78% |
| Values | Daily Returns |
American Homes 4 vs. Gaming Realms plc
Performance |
| Timeline |
| American Homes 4 |
| Gaming Realms plc |
American Homes and Gaming Realms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Gaming Realms
The main advantage of trading using opposite American Homes and Gaming Realms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Gaming Realms 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 Gaming Realms will offset losses from the drop in Gaming Realms' long position.| American Homes vs. Berkshire Hathaway | American Homes vs. Samsung Electronics Co | American Homes vs. Samsung Electronics Co | American Homes vs. Chocoladefabriken Lindt Spruengli |
| Gaming Realms vs. Broadridge Financial Solutions | Gaming Realms vs. Jupiter Fund Management | Gaming Realms vs. Molson Coors Beverage | Gaming Realms vs. Evolution Gaming Group |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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