Correlation Between American Homes and North Atlantic
Can any of the company-specific risk be diversified away by investing in both American Homes and North Atlantic 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 North Atlantic 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 North Atlantic Smaller, you can compare the effects of market volatilities on American Homes and North Atlantic 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 North Atlantic. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and North Atlantic.
Diversification Opportunities for American Homes and North Atlantic
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and North is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and North Atlantic Smaller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Atlantic Smaller 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 North Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Atlantic Smaller has no effect on the direction of American Homes i.e., American Homes and North Atlantic go up and down completely randomly.
Pair Corralation between American Homes and North Atlantic
Assuming the 90 days trading horizon American Homes 4 is expected to generate 1.19 times more return on investment than North Atlantic. However, American Homes is 1.19 times more volatile than North Atlantic Smaller. It trades about 0.0 of its potential returns per unit of risk. North Atlantic Smaller is currently generating about -0.1 per unit of risk. If you would invest 3,720 in American Homes 4 on September 19, 2024 and sell it today you would lose (2.00) from holding American Homes 4 or give up 0.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Homes 4 vs. North Atlantic Smaller
Performance |
| Timeline |
| American Homes 4 |
| North Atlantic Smaller |
American Homes and North Atlantic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and North Atlantic
The main advantage of trading using opposite American Homes and North Atlantic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, North Atlantic 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 North Atlantic will offset losses from the drop in North Atlantic's long position.| American Homes vs. Samsung Electronics Co | American Homes vs. Samsung Electronics Co | American Homes vs. Hyundai Motor | American Homes vs. Reliance Industries Ltd |
| North Atlantic vs. DXC Technology Co | North Atlantic vs. American Homes 4 | North Atlantic vs. Beazer Homes USA | North Atlantic vs. Synthomer 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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