Correlation Between INVITATION HOMES and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both INVITATION HOMES and Chongqing Machinery 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 INVITATION HOMES and Chongqing Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INVITATION HOMES DL and Chongqing Machinery Electric, you can compare the effects of market volatilities on INVITATION HOMES and Chongqing Machinery 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 INVITATION HOMES with a short position of Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of INVITATION HOMES and Chongqing Machinery.
Diversification Opportunities for INVITATION HOMES and Chongqing Machinery
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between INVITATION and Chongqing is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery and INVITATION 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 INVITATION HOMES DL are associated (or correlated) with Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and Chongqing Machinery go up and down completely randomly.
Pair Corralation between INVITATION HOMES and Chongqing Machinery
Assuming the 90 days horizon INVITATION HOMES is expected to generate 12.68 times less return on investment than Chongqing Machinery. But when comparing it to its historical volatility, INVITATION HOMES DL is 4.68 times less risky than Chongqing Machinery. It trades about 0.03 of its potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2.27 in Chongqing Machinery Electric on August 27, 2024 and sell it today you would earn a total of 5.18 from holding Chongqing Machinery Electric or generate 228.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
INVITATION HOMES DL vs. Chongqing Machinery Electric
Performance |
| Timeline |
| INVITATION HOMES |
| Chongqing Machinery |
INVITATION HOMES and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INVITATION HOMES and Chongqing Machinery
The main advantage of trading using opposite INVITATION HOMES and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INVITATION HOMES position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.| INVITATION HOMES vs. American Homes 4 | INVITATION HOMES vs. Superior Plus Corp | INVITATION HOMES vs. NMI Holdings | INVITATION HOMES vs. Origin Agritech |
| Chongqing Machinery vs. Superior Plus Corp | Chongqing Machinery vs. NMI Holdings | Chongqing Machinery vs. Origin Agritech | Chongqing Machinery vs. SIVERS SEMICONDUCTORS AB |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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