Correlation Between Chocoladefabriken and American Homes
Can any of the company-specific risk be diversified away by investing in both Chocoladefabriken 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 Chocoladefabriken and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chocoladefabriken Lindt Spruengli and American Homes 4, you can compare the effects of market volatilities on Chocoladefabriken 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 Chocoladefabriken with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chocoladefabriken and American Homes.
Diversification Opportunities for Chocoladefabriken and American Homes
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Chocoladefabriken and American is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chocoladefabriken Lindt Spruen 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 Chocoladefabriken 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 Chocoladefabriken Lindt Spruengli 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 Chocoladefabriken i.e., Chocoladefabriken and American Homes go up and down completely randomly.
Pair Corralation between Chocoladefabriken and American Homes
Assuming the 90 days trading horizon Chocoladefabriken is expected to generate 3.87 times less return on investment than American Homes. But when comparing it to its historical volatility, Chocoladefabriken Lindt Spruengli is 1.38 times less risky than American Homes. It trades about 0.01 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,137 in American Homes 4 on November 6, 2024 and sell it today you would earn a total of 323.00 from holding American Homes 4 or generate 10.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 90.55% |
| Values | Daily Returns |
Chocoladefabriken Lindt Spruen vs. American Homes 4
Performance |
| Timeline |
| Chocoladefabriken Lindt |
| American Homes 4 |
Chocoladefabriken and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chocoladefabriken and American Homes
The main advantage of trading using opposite Chocoladefabriken and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chocoladefabriken 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.The idea behind Chocoladefabriken Lindt Spruengli and American Homes 4 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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