Correlation Between American Homes and Brinks
Can any of the company-specific risk be diversified away by investing in both American Homes and Brinks 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 Brinks 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 The Brinks, you can compare the effects of market volatilities on American Homes and Brinks 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 Brinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Brinks.
Diversification Opportunities for American Homes and Brinks
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Brinks is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and The Brinks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks 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 Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks has no effect on the direction of American Homes i.e., American Homes and Brinks go up and down completely randomly.
Pair Corralation between American Homes and Brinks
Assuming the 90 days trading horizon American Homes 4 is expected to under-perform the Brinks. But the stock apears to be less risky and, when comparing its historical volatility, American Homes 4 is 1.03 times less risky than Brinks. The stock trades about -0.05 of its potential returns per unit of risk. The The Brinks is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 8,650 in The Brinks on October 16, 2024 and sell it today you would earn a total of 100.00 from holding The Brinks or generate 1.16% 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. The Brinks
Performance |
| Timeline |
| American Homes 4 |
| Brinks |
American Homes and Brinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Brinks
The main advantage of trading using opposite American Homes and Brinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Brinks 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 Brinks will offset losses from the drop in Brinks' long position.| American Homes vs. ALEFARM BREWING DK 05 | American Homes vs. Sterling Construction | American Homes vs. AGRICULTBK HADR25 YC | American Homes vs. ecotel communication ag |
| Brinks vs. American Homes 4 | Brinks vs. Columbia Sportswear | Brinks vs. Air Transport Services | Brinks vs. CENTURIA OFFICE REIT |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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