Correlation Between American Homes and Centerspace
Can any of the company-specific risk be diversified away by investing in both American Homes and Centerspace 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 Centerspace 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 Centerspace, you can compare the effects of market volatilities on American Homes and Centerspace 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 Centerspace. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Centerspace.
Diversification Opportunities for American Homes and Centerspace
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Centerspace is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Centerspace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerspace 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 Centerspace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerspace has no effect on the direction of American Homes i.e., American Homes and Centerspace go up and down completely randomly.
Pair Corralation between American Homes and Centerspace
Assuming the 90 days trading horizon American Homes 4 is expected to under-perform the Centerspace. But the preferred stock apears to be less risky and, when comparing its historical volatility, American Homes 4 is 2.18 times less risky than Centerspace. The preferred stock trades about -0.25 of its potential returns per unit of risk. The Centerspace is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,234 in Centerspace on November 22, 2024 and sell it today you would earn a total of 145.00 from holding Centerspace or generate 2.33% 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. Centerspace
Performance |
| Timeline |
| American Homes 4 |
| Centerspace |
American Homes and Centerspace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Centerspace
The main advantage of trading using opposite American Homes and Centerspace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Centerspace 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 Centerspace will offset losses from the drop in Centerspace's long position.| American Homes vs. Mid America Apartment Communities | American Homes vs. UMH Properties | American Homes vs. Clipper Realty | American Homes vs. American Homes 4 |
| Centerspace vs. BRT Realty Trust | Centerspace vs. Nexpoint Residential Trust | Centerspace vs. Veris Residential | Centerspace vs. Clipper Realty |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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