Correlation Between INVITATION HOMES and Mid America
Can any of the company-specific risk be diversified away by investing in both INVITATION HOMES and Mid America 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 Mid America 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 Mid America Apartment Communities, you can compare the effects of market volatilities on INVITATION HOMES and Mid America 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 Mid America. Check out your portfolio center. Please also check ongoing floating volatility patterns of INVITATION HOMES and Mid America.
Diversification Opportunities for INVITATION HOMES and Mid America
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between INVITATION and Mid is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and Mid America Apartment Communit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid America Apartment 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 Mid America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid America Apartment has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and Mid America go up and down completely randomly.
Pair Corralation between INVITATION HOMES and Mid America
Assuming the 90 days horizon INVITATION HOMES DL is expected to generate 0.93 times more return on investment than Mid America. However, INVITATION HOMES DL is 1.08 times less risky than Mid America. It trades about -0.21 of its potential returns per unit of risk. Mid America Apartment Communities is currently generating about -0.24 per unit of risk. If you would invest 3,190 in INVITATION HOMES DL on October 1, 2024 and sell it today you would lose (110.00) from holding INVITATION HOMES DL or give up 3.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
INVITATION HOMES DL vs. Mid America Apartment Communit
Performance |
| Timeline |
| INVITATION HOMES |
| Mid America Apartment |
INVITATION HOMES and Mid America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INVITATION HOMES and Mid America
The main advantage of trading using opposite INVITATION HOMES and Mid America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INVITATION HOMES position performs unexpectedly, Mid America 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 Mid America will offset losses from the drop in Mid America's long position.| INVITATION HOMES vs. AvalonBay Communities | INVITATION HOMES vs. Sun Communities | INVITATION HOMES vs. Essex Property Trust | INVITATION HOMES vs. American Homes 4 |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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