Correlation Between Globe Trade and American Homes
Can any of the company-specific risk be diversified away by investing in both Globe Trade 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 Globe Trade and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Globe Trade Centre and American Homes 4, you can compare the effects of market volatilities on Globe Trade 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 Globe Trade with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globe Trade and American Homes.
Diversification Opportunities for Globe Trade and American Homes
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Globe and American is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Globe Trade Centre 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 Globe Trade 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 Globe Trade Centre 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 Globe Trade i.e., Globe Trade and American Homes go up and down completely randomly.
Pair Corralation between Globe Trade and American Homes
Assuming the 90 days trading horizon Globe Trade is expected to generate 5.86 times less return on investment than American Homes. But when comparing it to its historical volatility, Globe Trade Centre is 5.84 times less risky than American Homes. It trades about 0.07 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,420 in American Homes 4 on August 28, 2024 and sell it today you would earn a total of 180.00 from holding American Homes 4 or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Globe Trade Centre vs. American Homes 4
Performance |
| Timeline |
| Globe Trade Centre |
| American Homes 4 |
Globe Trade and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Globe Trade and American Homes
The main advantage of trading using opposite Globe Trade and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globe Trade 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.| Globe Trade vs. Corporate Office Properties | Globe Trade vs. TSOGO SUN GAMING | Globe Trade vs. DFS Furniture PLC | Globe Trade vs. FUTURE GAMING GRP |
| American Homes vs. Superior Plus Corp | American Homes vs. NMI Holdings | American Homes vs. Origin Agritech | American Homes vs. SIVERS SEMICONDUCTORS AB |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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