Correlation Between American Homes and UMH Properties
Can any of the company-specific risk be diversified away by investing in both American Homes and UMH Properties 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 UMH Properties 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 UMH Properties, you can compare the effects of market volatilities on American Homes and UMH Properties 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 UMH Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and UMH Properties.
Diversification Opportunities for American Homes and UMH Properties
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and UMH is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and UMH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMH Properties 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 UMH Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMH Properties has no effect on the direction of American Homes i.e., American Homes and UMH Properties go up and down completely randomly.
Pair Corralation between American Homes and UMH Properties
Considering the 90-day investment horizon American Homes 4 is expected to under-perform the UMH Properties. But the stock apears to be less risky and, when comparing its historical volatility, American Homes 4 is 1.04 times less risky than UMH Properties. The stock trades about -0.18 of its potential returns per unit of risk. The UMH Properties is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 1,892 in UMH Properties on October 23, 2024 and sell it today you would lose (64.00) from holding UMH Properties or give up 3.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. UMH Properties
Performance |
| Timeline |
| American Homes 4 |
| UMH Properties |
American Homes and UMH Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and UMH Properties
The main advantage of trading using opposite American Homes and UMH Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, UMH Properties 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 UMH Properties will offset losses from the drop in UMH Properties' long position.| American Homes vs. Sun Communities | American Homes vs. Clipper Realty | American Homes vs. UDR Inc | American Homes vs. UMH Properties |
| UMH Properties vs. Sun Communities | UMH Properties vs. Clipper Realty | UMH Properties vs. UDR Inc | UMH Properties vs. American Homes 4 |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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