Correlation Between American Homes and Aedas Homes
Can any of the company-specific risk be diversified away by investing in both American Homes and Aedas 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 Aedas 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 Aedas Homes SA, you can compare the effects of market volatilities on American Homes and Aedas 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 Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Aedas Homes.
Diversification Opportunities for American Homes and Aedas Homes
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Aedas is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas 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 Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of American Homes i.e., American Homes and Aedas Homes go up and down completely randomly.
Pair Corralation between American Homes and Aedas Homes
Assuming the 90 days trading horizon American Homes 4 is expected to generate 1.23 times more return on investment than Aedas Homes. However, American Homes is 1.23 times more volatile than Aedas Homes SA. It trades about 0.04 of its potential returns per unit of risk. Aedas Homes SA is currently generating about -0.13 per unit of risk. If you would invest 3,540 in American Homes 4 on August 29, 2024 and sell it today you would earn a total of 60.00 from holding American Homes 4 or generate 1.69% 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. Aedas Homes SA
Performance |
| Timeline |
| American Homes 4 |
| Aedas Homes SA |
American Homes and Aedas Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Aedas Homes
The main advantage of trading using opposite American Homes and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Aedas 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 Aedas Homes will offset losses from the drop in Aedas Homes' long position.| American Homes vs. Superior Plus Corp | American Homes vs. NMI Holdings | American Homes vs. Origin Agritech | American Homes 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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