Correlation Between Avery Dennison and American Homes
Can any of the company-specific risk be diversified away by investing in both Avery Dennison 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 Avery Dennison and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avery Dennison Corp and American Homes 4, you can compare the effects of market volatilities on Avery Dennison 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 Avery Dennison with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avery Dennison and American Homes.
Diversification Opportunities for Avery Dennison and American Homes
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Avery and American is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp 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 Avery Dennison 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 Avery Dennison Corp 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 Avery Dennison i.e., Avery Dennison and American Homes go up and down completely randomly.
Pair Corralation between Avery Dennison and American Homes
Assuming the 90 days horizon Avery Dennison Corp is expected to under-perform the American Homes. But the stock apears to be less risky and, when comparing its historical volatility, Avery Dennison Corp is 1.43 times less risky than American Homes. The stock trades about -0.11 of its potential returns per unit of risk. The American Homes 4 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,580 in American Homes 4 on September 14, 2024 and sell it today you would earn a total of 20.00 from holding American Homes 4 or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avery Dennison Corp vs. American Homes 4
Performance |
| Timeline |
| Avery Dennison Corp |
| American Homes 4 |
Avery Dennison and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avery Dennison and American Homes
The main advantage of trading using opposite Avery Dennison and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avery Dennison 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.| Avery Dennison vs. FUJIFILM Holdings | Avery Dennison vs. Konica Minolta | Avery Dennison vs. KOKUYO LTD | Avery Dennison vs. Takkt AG |
| American Homes vs. INVITATION HOMES DL | American Homes vs. Superior Plus Corp | American Homes vs. SIVERS SEMICONDUCTORS AB | American Homes vs. NorAm Drilling AS |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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