Correlation Between American Homes and Neinor Homes
Can any of the company-specific risk be diversified away by investing in both American Homes and Neinor 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 American Homes and Neinor Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Homes 4 and Neinor Homes SA, you can compare the effects of market volatilities on American Homes and Neinor 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 American Homes with a short position of Neinor Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Neinor Homes.
Diversification Opportunities for American Homes and Neinor Homes
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Neinor is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Neinor Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neinor Homes SA and American 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 American Homes 4 are associated (or correlated) with Neinor Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neinor Homes SA has no effect on the direction of American Homes i.e., American Homes and Neinor Homes go up and down completely randomly.
Pair Corralation between American Homes and Neinor Homes
Assuming the 90 days trading horizon American Homes is expected to generate 2.63 times less return on investment than Neinor Homes. In addition to that, American Homes is 1.17 times more volatile than Neinor Homes SA. It trades about 0.05 of its total potential returns per unit of risk. Neinor Homes SA is currently generating about 0.16 per unit of volatility. If you would invest 1,083 in Neinor Homes SA on September 3, 2024 and sell it today you would earn a total of 421.00 from holding Neinor Homes SA or generate 38.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. Neinor Homes SA
Performance |
| Timeline |
| American Homes 4 |
| Neinor Homes SA |
American Homes and Neinor Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Neinor Homes
The main advantage of trading using opposite American Homes and Neinor Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Neinor 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 Neinor Homes will offset losses from the drop in Neinor Homes' long position.| American Homes vs. AvalonBay Communities | American Homes vs. UDR Inc | American Homes vs. INVITATION HOMES DL |
| Neinor Homes vs. Playtech plc | Neinor Homes vs. LG Display Co | Neinor Homes vs. NorAm Drilling AS | Neinor Homes vs. InPlay Oil 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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