Correlation Between American Homes and National Beverage
Can any of the company-specific risk be diversified away by investing in both American Homes and National Beverage 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 National Beverage 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 National Beverage Corp, you can compare the effects of market volatilities on American Homes and National Beverage 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 National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and National Beverage.
Diversification Opportunities for American Homes and National Beverage
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and National is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp 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 National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of American Homes i.e., American Homes and National Beverage go up and down completely randomly.
Pair Corralation between American Homes and National Beverage
Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.88 times more return on investment than National Beverage. However, American Homes 4 is 1.14 times less risky than National Beverage. It trades about 0.03 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.02 per unit of risk. If you would invest 2,849 in American Homes 4 on October 16, 2024 and sell it today you would earn a total of 571.00 from holding American Homes 4 or generate 20.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. National Beverage Corp
Performance |
| Timeline |
| American Homes 4 |
| National Beverage Corp |
American Homes and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and National Beverage
The main advantage of trading using opposite American Homes and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| American Homes vs. ALEFARM BREWING DK 05 | American Homes vs. Sterling Construction | American Homes vs. AGRICULTBK HADR25 YC | American Homes vs. ecotel communication ag |
| National Beverage vs. American Homes 4 | National Beverage vs. Siamgas And Petrochemicals | National Beverage vs. KENEDIX OFFICE INV | National Beverage vs. DAIRY FARM INTL |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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