Correlation Between American Homes and LANDSEA HOMES
Can any of the company-specific risk be diversified away by investing in both American Homes and LANDSEA 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 LANDSEA 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 LANDSEA HOMES P, you can compare the effects of market volatilities on American Homes and LANDSEA 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 LANDSEA HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and LANDSEA HOMES.
Diversification Opportunities for American Homes and LANDSEA HOMES
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and LANDSEA is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and LANDSEA HOMES P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LANDSEA HOMES P 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 LANDSEA HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LANDSEA HOMES P has no effect on the direction of American Homes i.e., American Homes and LANDSEA HOMES go up and down completely randomly.
Pair Corralation between American Homes and LANDSEA HOMES
Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.54 times more return on investment than LANDSEA HOMES. However, American Homes 4 is 1.87 times less risky than LANDSEA HOMES. It trades about -0.01 of its potential returns per unit of risk. LANDSEA HOMES P is currently generating about -0.31 per unit of risk. If you would invest 3,515 in American Homes 4 on September 25, 2024 and sell it today you would lose (15.00) from holding American Homes 4 or give up 0.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. LANDSEA HOMES P
Performance |
| Timeline |
| American Homes 4 |
| LANDSEA HOMES P |
American Homes and LANDSEA HOMES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and LANDSEA HOMES
The main advantage of trading using opposite American Homes and LANDSEA HOMES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, LANDSEA 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 LANDSEA HOMES will offset losses from the drop in LANDSEA HOMES's long position.| American Homes vs. MI Homes | American Homes vs. Fukuyama Transporting Co | American Homes vs. Focus Home Interactive | American Homes vs. Haverty Furniture Companies |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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