Correlation Between American Balanced and American Homes
Can any of the company-specific risk be diversified away by investing in both American Balanced and American Homes 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 Balanced and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and American Homes 4, you can compare the effects of market volatilities on American Balanced and American Homes 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 Balanced with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and American Homes.
Diversification Opportunities for American Balanced and American Homes
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and American is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 and American Balanced 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 Balanced are associated (or correlated) with American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of American Balanced i.e., American Balanced and American Homes go up and down completely randomly.
Pair Corralation between American Balanced and American Homes
Assuming the 90 days horizon American Balanced is expected to generate 0.43 times more return on investment than American Homes. However, American Balanced is 2.32 times less risky than American Homes. It trades about 0.21 of its potential returns per unit of risk. American Homes 4 is currently generating about -0.18 per unit of risk. If you would invest 3,457 in American Balanced on October 24, 2024 and sell it today you would earn a total of 77.00 from holding American Balanced or generate 2.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced vs. American Homes 4
Performance |
| Timeline |
| American Balanced |
| American Homes 4 |
American Balanced and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and American Homes
The main advantage of trading using opposite American Balanced and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| American Balanced vs. Income Fund Of | American Balanced vs. Capital Income Builder | American Balanced vs. Capital World Growth | American Balanced vs. Growth Fund Of |
| American Homes vs. Sun Communities | American Homes vs. Clipper Realty | American Homes vs. UDR Inc | American Homes vs. UMH Properties |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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