Correlation Between American Homes and China Shenhua
Can any of the company-specific risk be diversified away by investing in both American Homes and China Shenhua 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 China Shenhua 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 China Shenhua Energy, you can compare the effects of market volatilities on American Homes and China Shenhua 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 China Shenhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and China Shenhua.
Diversification Opportunities for American Homes and China Shenhua
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and China is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and China Shenhua Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Shenhua Energy 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 China Shenhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Shenhua Energy has no effect on the direction of American Homes i.e., American Homes and China Shenhua go up and down completely randomly.
Pair Corralation between American Homes and China Shenhua
Assuming the 90 days trading horizon American Homes is expected to generate 6.96 times less return on investment than China Shenhua. But when comparing it to its historical volatility, American Homes 4 is 2.17 times less risky than China Shenhua. It trades about 0.04 of its potential returns per unit of risk. China Shenhua Energy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 383.00 in China Shenhua Energy on September 13, 2024 and sell it today you would earn a total of 34.00 from holding China Shenhua Energy or generate 8.88% 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. China Shenhua Energy
Performance |
| Timeline |
| American Homes 4 |
| China Shenhua Energy |
American Homes and China Shenhua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and China Shenhua
The main advantage of trading using opposite American Homes and China Shenhua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, China Shenhua 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 China Shenhua will offset losses from the drop in China Shenhua's long position.| American Homes vs. INVITATION HOMES DL | American Homes vs. Superior Plus Corp | American Homes vs. SIVERS SEMICONDUCTORS AB | American Homes vs. NorAm Drilling AS |
| China Shenhua vs. PT Bayan Resources | China Shenhua vs. Yanzhou Coal Mining | China Shenhua vs. Yanzhou Coal Mining | China Shenhua vs. PT Adaro Energy |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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