Correlation Between American Homes and ASML Holding
Can any of the company-specific risk be diversified away by investing in both American Homes and ASML Holding 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 ASML Holding 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 ASML Holding NV, you can compare the effects of market volatilities on American Homes and ASML Holding 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 ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and ASML Holding.
Diversification Opportunities for American Homes and ASML Holding
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and ASML is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and ASML Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML Holding NV 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 ASML Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASML Holding NV has no effect on the direction of American Homes i.e., American Homes and ASML Holding go up and down completely randomly.
Pair Corralation between American Homes and ASML Holding
Assuming the 90 days trading horizon American Homes 4 is expected to generate 1.27 times more return on investment than ASML Holding. However, American Homes is 1.27 times more volatile than ASML Holding NV. It trades about -0.02 of its potential returns per unit of risk. ASML Holding NV is currently generating about -0.16 per unit of risk. If you would invest 3,620 in American Homes 4 on August 24, 2024 and sell it today you would lose (60.00) from holding American Homes 4 or give up 1.66% 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. ASML Holding NV
Performance |
| Timeline |
| American Homes 4 |
| ASML Holding NV |
American Homes and ASML Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and ASML Holding
The main advantage of trading using opposite American Homes and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, ASML Holding 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 ASML Holding will offset losses from the drop in ASML Holding's long position.| American Homes vs. Equity Residential | American Homes vs. INVITATION HOMES DL | American Homes vs. Superior Plus Corp | American Homes vs. NMI Holdings |
| ASML Holding vs. Autohome ADR | ASML Holding vs. ZURICH INSURANCE GROUP | ASML Holding vs. Tri Pointe Homes | ASML Holding vs. Taylor Morrison Home |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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