Correlation Between Auto Trader and American Homes
Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and American Homes 4, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and American Homes.
Diversification Opportunities for Auto Trader and American Homes
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Auto and American is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group 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 Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and American Homes go up and down completely randomly.
Pair Corralation between Auto Trader and American Homes
Assuming the 90 days trading horizon Auto Trader Group is expected to generate 1.1 times more return on investment than American Homes. However, Auto Trader is 1.1 times more volatile than American Homes 4. It trades about 0.19 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.03 per unit of risk. If you would invest 79,300 in Auto Trader Group on September 13, 2024 and sell it today you would earn a total of 3,100 from holding Auto Trader Group or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Auto Trader Group vs. American Homes 4
Performance |
| Timeline |
| Auto Trader Group |
| American Homes 4 |
Auto Trader and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and American Homes
The main advantage of trading using opposite Auto Trader and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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.| Auto Trader vs. Berkshire Hathaway | Auto Trader vs. Hyundai Motor | Auto Trader vs. Samsung Electronics Co | Auto Trader vs. Samsung Electronics Co |
| American Homes vs. European Metals Holdings | American Homes vs. Omega Healthcare Investors | American Homes vs. Empire Metals Limited | American Homes vs. Induction Healthcare Group |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |