Correlation Between American Homes and Zegona Communications
Can any of the company-specific risk be diversified away by investing in both American Homes and Zegona Communications 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 Zegona Communications 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 Zegona Communications Plc, you can compare the effects of market volatilities on American Homes and Zegona Communications 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 Zegona Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Zegona Communications.
Diversification Opportunities for American Homes and Zegona Communications
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Zegona is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Zegona Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zegona Communications 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 Zegona Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zegona Communications Plc has no effect on the direction of American Homes i.e., American Homes and Zegona Communications go up and down completely randomly.
Pair Corralation between American Homes and Zegona Communications
Assuming the 90 days trading horizon American Homes is expected to generate 22.54 times less return on investment than Zegona Communications. But when comparing it to its historical volatility, American Homes 4 is 11.98 times less risky than Zegona Communications. It trades about 0.03 of its potential returns per unit of risk. Zegona Communications Plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,650 in Zegona Communications Plc on October 16, 2024 and sell it today you would earn a total of 32,150 from holding Zegona Communications Plc or generate 420.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.71% |
| Values | Daily Returns |
American Homes 4 vs. Zegona Communications Plc
Performance |
| Timeline |
| American Homes 4 |
| Zegona Communications Plc |
American Homes and Zegona Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Zegona Communications
The main advantage of trading using opposite American Homes and Zegona Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Zegona Communications 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 Zegona Communications will offset losses from the drop in Zegona Communications' long position.| American Homes vs. Zegona Communications Plc | American Homes vs. Beazer Homes USA | American Homes vs. Pets at Home | American Homes vs. Verizon Communications |
| Zegona Communications vs. TBC Bank Group | Zegona Communications vs. American Homes 4 | Zegona Communications vs. UNIQA Insurance Group | Zegona Communications vs. Metro Bank 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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