Correlation Between China BlueChemical and American Homes
Can any of the company-specific risk be diversified away by investing in both China BlueChemical 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 China BlueChemical and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China BlueChemical and American Homes 4, you can compare the effects of market volatilities on China BlueChemical 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 China BlueChemical with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of China BlueChemical and American Homes.
Diversification Opportunities for China BlueChemical and American Homes
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and American is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical 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 China BlueChemical 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 China BlueChemical 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 China BlueChemical i.e., China BlueChemical and American Homes go up and down completely randomly.
Pair Corralation between China BlueChemical and American Homes
Assuming the 90 days horizon China BlueChemical is expected to under-perform the American Homes. In addition to that, China BlueChemical is 2.08 times more volatile than American Homes 4. It trades about -0.01 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.05 per unit of volatility. If you would invest 3,230 in American Homes 4 on September 1, 2024 and sell it today you would earn a total of 390.00 from holding American Homes 4 or generate 12.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China BlueChemical vs. American Homes 4
Performance |
| Timeline |
| China BlueChemical |
| American Homes 4 |
China BlueChemical and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China BlueChemical and American Homes
The main advantage of trading using opposite China BlueChemical and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China BlueChemical 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.| China BlueChemical vs. Corteva | China BlueChemical vs. Nutrien | China BlueChemical vs. The Mosaic | China BlueChemical vs. CF Industries Holdings |
| American Homes vs. UDR Inc | American Homes vs. Superior Plus Corp | American Homes vs. Origin Agritech | American Homes vs. Identiv |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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