Correlation Between American Homes and Kohls
Can any of the company-specific risk be diversified away by investing in both American Homes and Kohls 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 Kohls 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 Kohls, you can compare the effects of market volatilities on American Homes and Kohls 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 Kohls. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Kohls.
Diversification Opportunities for American Homes and Kohls
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Kohls is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Kohls in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohls 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 Kohls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohls has no effect on the direction of American Homes i.e., American Homes and Kohls go up and down completely randomly.
Pair Corralation between American Homes and Kohls
Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.62 times more return on investment than Kohls. However, American Homes 4 is 1.61 times less risky than Kohls. It trades about 0.05 of its potential returns per unit of risk. Kohls is currently generating about -0.06 per unit of risk. If you would invest 3,250 in American Homes 4 on September 3, 2024 and sell it today you would earn a total of 310.00 from holding American Homes 4 or generate 9.54% 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. Kohls
Performance |
| Timeline |
| American Homes 4 |
| Kohls |
American Homes and Kohls Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Kohls
The main advantage of trading using opposite American Homes and Kohls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Kohls 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 Kohls will offset losses from the drop in Kohls' long position.| American Homes vs. AvalonBay Communities | American Homes vs. UDR Inc | American Homes vs. INVITATION HOMES DL |
| Kohls vs. Magic Software Enterprises | Kohls vs. VULCAN MATERIALS | Kohls vs. PSI Software AG | Kohls vs. Plastic Omnium |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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