Correlation Between Public Storage and American Homes
Can any of the company-specific risk be diversified away by investing in both Public Storage 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 Public Storage and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Public Storage and American Homes 4, you can compare the effects of market volatilities on Public Storage 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 Public Storage with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Storage and American Homes.
Diversification Opportunities for Public Storage and American Homes
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Public and American is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Public Storage 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 Public Storage 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 Public Storage 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 Public Storage i.e., Public Storage and American Homes go up and down completely randomly.
Pair Corralation between Public Storage and American Homes
Assuming the 90 days trading horizon Public Storage is expected to generate 2.92 times less return on investment than American Homes. In addition to that, Public Storage is 1.76 times more volatile than American Homes 4. It trades about 0.06 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.32 per unit of volatility. If you would invest 3,520 in American Homes 4 on September 5, 2024 and sell it today you would earn a total of 248.00 from holding American Homes 4 or generate 7.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Public Storage vs. American Homes 4
Performance |
| Timeline |
| Public Storage |
| American Homes 4 |
Public Storage and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Public Storage and American Homes
The main advantage of trading using opposite Public Storage and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Storage 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.| Public Storage vs. Samsung Electronics Co | Public Storage vs. Samsung Electronics Co | Public Storage vs. Hyundai Motor | Public Storage vs. Toyota Motor Corp |
| American Homes vs. Axway Software SA | American Homes vs. Public Storage | American Homes vs. Telecom Italia SpA | American Homes vs. Orient Telecoms |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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