Correlation Between CVR Energy and American Homes
Can any of the company-specific risk be diversified away by investing in both CVR Energy and American Homes 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 CVR Energy and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVR Energy and American Homes 4, you can compare the effects of market volatilities on CVR Energy and American Homes 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 CVR Energy with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVR Energy and American Homes.
Diversification Opportunities for CVR Energy and American Homes
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CVR and American is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 and CVR Energy 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 CVR Energy are associated (or correlated) with American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of CVR Energy i.e., CVR Energy and American Homes go up and down completely randomly.
Pair Corralation between CVR Energy and American Homes
Assuming the 90 days trading horizon CVR Energy is expected to under-perform the American Homes. In addition to that, CVR Energy is 3.77 times more volatile than American Homes 4. It trades about -0.07 of its total potential returns per unit of risk. American Homes 4 is currently generating about -0.03 per unit of volatility. If you would invest 3,872 in American Homes 4 on August 26, 2024 and sell it today you would lose (112.00) from holding American Homes 4 or give up 2.89% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
CVR Energy vs. American Homes 4
Performance |
Timeline |
CVR Energy |
American Homes 4 |
CVR Energy and American Homes Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CVR Energy and American Homes
The main advantage of trading using opposite CVR Energy and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.CVR Energy vs. Ecclesiastical Insurance Office | CVR Energy vs. Kinnevik Investment AB | CVR Energy vs. Gaming Realms plc | CVR Energy vs. The Investment |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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