Correlation Between Induction Healthcare and American Homes
Can any of the company-specific risk be diversified away by investing in both Induction Healthcare 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 Induction Healthcare and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Induction Healthcare Group and American Homes 4, you can compare the effects of market volatilities on Induction Healthcare 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 Induction Healthcare with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Induction Healthcare and American Homes.
Diversification Opportunities for Induction Healthcare and American Homes
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Induction and American is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Induction Healthcare 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 Induction Healthcare 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 Induction Healthcare 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 Induction Healthcare i.e., Induction Healthcare and American Homes go up and down completely randomly.
Pair Corralation between Induction Healthcare and American Homes
Assuming the 90 days trading horizon Induction Healthcare Group is expected to under-perform the American Homes. In addition to that, Induction Healthcare is 3.16 times more volatile than American Homes 4. It trades about -0.08 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.03 per unit of volatility. If you would invest 3,502 in American Homes 4 on September 14, 2024 and sell it today you would earn a total of 305.00 from holding American Homes 4 or generate 8.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.94% |
| Values | Daily Returns |
Induction Healthcare Group vs. American Homes 4
Performance |
| Timeline |
| Induction Healthcare |
| American Homes 4 |
Induction Healthcare and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Induction Healthcare and American Homes
The main advantage of trading using opposite Induction Healthcare and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Induction Healthcare 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.| Induction Healthcare vs. Waste Management | Induction Healthcare vs. Tatton Asset Management | Induction Healthcare vs. Bankers Investment Trust | Induction Healthcare vs. Liontrust Asset Management |
| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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