Correlation Between American Homes and Equity LifeStyle
Can any of the company-specific risk be diversified away by investing in both American Homes and Equity LifeStyle 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 Equity LifeStyle 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 Equity LifeStyle Properties, you can compare the effects of market volatilities on American Homes and Equity LifeStyle 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 Equity LifeStyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Equity LifeStyle.
Diversification Opportunities for American Homes and Equity LifeStyle
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Equity is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Equity LifeStyle Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity LifeStyle Pro 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 Equity LifeStyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity LifeStyle Pro has no effect on the direction of American Homes i.e., American Homes and Equity LifeStyle go up and down completely randomly.
Pair Corralation between American Homes and Equity LifeStyle
Assuming the 90 days trading horizon American Homes is expected to generate 1.34 times less return on investment than Equity LifeStyle. In addition to that, American Homes is 1.55 times more volatile than Equity LifeStyle Properties. It trades about 0.03 of its total potential returns per unit of risk. Equity LifeStyle Properties is currently generating about 0.06 per unit of volatility. If you would invest 5,858 in Equity LifeStyle Properties on September 23, 2024 and sell it today you would earn a total of 542.00 from holding Equity LifeStyle Properties or generate 9.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. Equity LifeStyle Properties
Performance |
| Timeline |
| American Homes 4 |
| Equity LifeStyle Pro |
American Homes and Equity LifeStyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Equity LifeStyle
The main advantage of trading using opposite American Homes and Equity LifeStyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Equity LifeStyle 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 Equity LifeStyle will offset losses from the drop in Equity LifeStyle's long position.| American Homes vs. Equity Residential | American Homes vs. AvalonBay Communities | American Homes vs. UDR Inc | American Homes vs. INVITATION HOMES DL |
| Equity LifeStyle vs. Equity Residential | Equity LifeStyle vs. AvalonBay Communities | Equity LifeStyle vs. UDR Inc | Equity LifeStyle vs. INVITATION HOMES DL |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |