Correlation Between CITY OFFICE and American Homes
Can any of the company-specific risk be diversified away by investing in both CITY OFFICE 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 CITY OFFICE and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CITY OFFICE REIT and American Homes 4, you can compare the effects of market volatilities on CITY OFFICE 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 CITY OFFICE with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITY OFFICE and American Homes.
Diversification Opportunities for CITY OFFICE and American Homes
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CITY and American is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT 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 CITY OFFICE 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 CITY OFFICE REIT 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 CITY OFFICE i.e., CITY OFFICE and American Homes go up and down completely randomly.
Pair Corralation between CITY OFFICE and American Homes
Assuming the 90 days horizon CITY OFFICE REIT is expected to generate 1.94 times more return on investment than American Homes. However, CITY OFFICE is 1.94 times more volatile than American Homes 4. It trades about 0.03 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.03 per unit of risk. If you would invest 443.00 in CITY OFFICE REIT on August 31, 2024 and sell it today you would earn a total of 117.00 from holding CITY OFFICE REIT or generate 26.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
CITY OFFICE REIT vs. American Homes 4
Performance |
| Timeline |
| CITY OFFICE REIT |
| American Homes 4 |
CITY OFFICE and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CITY OFFICE and American Homes
The main advantage of trading using opposite CITY OFFICE and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITY OFFICE 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.| CITY OFFICE vs. Columbia Sportswear | CITY OFFICE vs. INTERSHOP Communications Aktiengesellschaft | CITY OFFICE vs. Charter Communications | CITY OFFICE vs. KOOL2PLAY SA ZY |
| American Homes vs. UDR Inc | American Homes vs. INVITATION HOMES DL | American Homes vs. Superior Plus Corp | American Homes vs. Origin Agritech |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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