Correlation Between INVITATION HOMES and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both INVITATION HOMES and Sterling Construction 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 Sterling Construction 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 Sterling Construction, you can compare the effects of market volatilities on INVITATION HOMES and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of INVITATION HOMES and Sterling Construction.
Diversification Opportunities for INVITATION HOMES and Sterling Construction
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between INVITATION and Sterling is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and Sterling Construction go up and down completely randomly.
Pair Corralation between INVITATION HOMES and Sterling Construction
Assuming the 90 days horizon INVITATION HOMES is expected to generate 8.16 times less return on investment than Sterling Construction. But when comparing it to its historical volatility, INVITATION HOMES DL is 2.5 times less risky than Sterling Construction. It trades about 0.05 of its potential returns per unit of risk. Sterling Construction is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 5,750 in Sterling Construction on August 27, 2024 and sell it today you would earn a total of 13,005 from holding Sterling Construction or generate 226.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
INVITATION HOMES DL vs. Sterling Construction
Performance |
| Timeline |
| INVITATION HOMES |
| Sterling Construction |
INVITATION HOMES and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INVITATION HOMES and Sterling Construction
The main advantage of trading using opposite INVITATION HOMES and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INVITATION HOMES position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction'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 |
| Sterling Construction vs. China Railway Group | Sterling Construction vs. China Railway Construction | Sterling Construction vs. AECOM | Sterling Construction vs. Superior Plus Corp |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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