Correlation Between American Homes and ALERION CLEANPOWER
Can any of the company-specific risk be diversified away by investing in both American Homes and ALERION CLEANPOWER 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 ALERION CLEANPOWER 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 ALERION CLEANPOWER, you can compare the effects of market volatilities on American Homes and ALERION CLEANPOWER 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 ALERION CLEANPOWER. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and ALERION CLEANPOWER.
Diversification Opportunities for American Homes and ALERION CLEANPOWER
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and ALERION is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and ALERION CLEANPOWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALERION CLEANPOWER 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 ALERION CLEANPOWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALERION CLEANPOWER has no effect on the direction of American Homes i.e., American Homes and ALERION CLEANPOWER go up and down completely randomly.
Pair Corralation between American Homes and ALERION CLEANPOWER
Assuming the 90 days trading horizon American Homes 4 is expected to under-perform the ALERION CLEANPOWER. But the stock apears to be less risky and, when comparing its historical volatility, American Homes 4 is 1.15 times less risky than ALERION CLEANPOWER. The stock trades about -0.23 of its potential returns per unit of risk. The ALERION CLEANPOWER is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 1,590 in ALERION CLEANPOWER on October 26, 2024 and sell it today you would lose (90.00) from holding ALERION CLEANPOWER or give up 5.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. ALERION CLEANPOWER
Performance |
| Timeline |
| American Homes 4 |
| ALERION CLEANPOWER |
American Homes and ALERION CLEANPOWER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and ALERION CLEANPOWER
The main advantage of trading using opposite American Homes and ALERION CLEANPOWER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, ALERION CLEANPOWER 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 ALERION CLEANPOWER will offset losses from the drop in ALERION CLEANPOWER's long position.| American Homes vs. Plastic Omnium | American Homes vs. Shin Etsu Chemical Co | American Homes vs. Soken Chemical Engineering | American Homes vs. Compagnie Plastic Omnium |
| ALERION CLEANPOWER vs. STEEL DYNAMICS | ALERION CLEANPOWER vs. Olympic Steel | ALERION CLEANPOWER vs. ADDUS HOMECARE | ALERION CLEANPOWER vs. American Homes 4 |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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