Correlation Between Mid America and American Homes
Can any of the company-specific risk be diversified away by investing in both Mid America 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 Mid America and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid America Apartment Communities and American Homes 4, you can compare the effects of market volatilities on Mid America 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 Mid America with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid America and American Homes.
Diversification Opportunities for Mid America and American Homes
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mid and American is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Mid America Apartment Communit 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 Mid America 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 Mid America Apartment Communities 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 Mid America i.e., Mid America and American Homes go up and down completely randomly.
Pair Corralation between Mid America and American Homes
Assuming the 90 days trading horizon Mid America is expected to generate 8.69 times less return on investment than American Homes. But when comparing it to its historical volatility, Mid America Apartment Communities is 1.74 times less risky than American Homes. It trades about 0.1 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 3,502 in American Homes 4 on September 2, 2024 and sell it today you would earn a total of 327.00 from holding American Homes 4 or generate 9.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid America Apartment Communit vs. American Homes 4
Performance |
| Timeline |
| Mid America Apartment |
| American Homes 4 |
Mid America and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid America and American Homes
The main advantage of trading using opposite Mid America and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid America 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.| Mid America vs. American Homes 4 | Mid America vs. BRT Realty Trust | Mid America vs. Nexpoint Residential Trust | Mid America vs. Centerspace |
| American Homes vs. Sun Communities | American Homes vs. Clipper Realty | American Homes vs. UDR Inc | American Homes vs. UMH Properties |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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