Correlation Between American Homes and Tanger Factory
Can any of the company-specific risk be diversified away by investing in both American Homes and Tanger Factory 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 Tanger Factory 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 Tanger Factory Outlet, you can compare the effects of market volatilities on American Homes and Tanger Factory 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 Tanger Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Tanger Factory.
Diversification Opportunities for American Homes and Tanger Factory
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and Tanger is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Tanger Factory Outlet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanger Factory Outlet 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 Tanger Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanger Factory Outlet has no effect on the direction of American Homes i.e., American Homes and Tanger Factory go up and down completely randomly.
Pair Corralation between American Homes and Tanger Factory
Assuming the 90 days trading horizon American Homes is expected to generate 2.58 times less return on investment than Tanger Factory. In addition to that, American Homes is 1.28 times more volatile than Tanger Factory Outlet. It trades about 0.05 of its total potential returns per unit of risk. Tanger Factory Outlet is currently generating about 0.18 per unit of volatility. If you would invest 2,469 in Tanger Factory Outlet on September 1, 2024 and sell it today you would earn a total of 1,014 from holding Tanger Factory Outlet or generate 41.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.24% |
| Values | Daily Returns |
American Homes 4 vs. Tanger Factory Outlet
Performance |
| Timeline |
| American Homes 4 |
| Tanger Factory Outlet |
American Homes and Tanger Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Tanger Factory
The main advantage of trading using opposite American Homes and Tanger Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Tanger Factory 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 Tanger Factory will offset losses from the drop in Tanger Factory's long position.| American Homes vs. UDR Inc | American Homes vs. Superior Plus Corp | American Homes vs. Origin Agritech | American Homes vs. Identiv |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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