Correlation Between Empire State and Invitation Homes
Can any of the company-specific risk be diversified away by investing in both Empire State and Invitation 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 Empire State and Invitation Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Empire State Realty and Invitation Homes, you can compare the effects of market volatilities on Empire State and Invitation 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 Empire State with a short position of Invitation Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Invitation Homes.
Diversification Opportunities for Empire State and Invitation Homes
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Empire and Invitation is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes and Empire State 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 Empire State Realty are associated (or correlated) with Invitation Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invitation Homes has no effect on the direction of Empire State i.e., Empire State and Invitation Homes go up and down completely randomly.
Pair Corralation between Empire State and Invitation Homes
Given the investment horizon of 90 days Empire State Realty is expected to under-perform the Invitation Homes. In addition to that, Empire State is 1.91 times more volatile than Invitation Homes. It trades about -0.16 of its total potential returns per unit of risk. Invitation Homes is currently generating about -0.19 per unit of volatility. If you would invest 3,354 in Invitation Homes on October 26, 2024 and sell it today you would lose (284.00) from holding Invitation Homes or give up 8.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Empire State Realty vs. Invitation Homes
Performance |
| Timeline |
| Empire State Realty |
| Invitation Homes |
Empire State and Invitation Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Invitation Homes
The main advantage of trading using opposite Empire State and Invitation Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Invitation 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 Invitation Homes will offset losses from the drop in Invitation Homes' long position.| Empire State vs. Empire State Realty | Empire State vs. City Office | Empire State vs. Cousins Properties Incorporated | Empire State vs. Postal Realty Trust |
| Invitation Homes vs. American Homes 4 | Invitation Homes vs. Mid America Apartment Communities | Invitation Homes vs. Camden Property Trust | Invitation Homes vs. Sun Communities |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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