Correlation Between Mid America and Invitation Homes
Can any of the company-specific risk be diversified away by investing in both Mid America 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 Mid America and Invitation 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 Invitation Homes, you can compare the effects of market volatilities on Mid America 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 Mid America with a short position of Invitation Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid America and Invitation Homes.
Diversification Opportunities for Mid America and Invitation Homes
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mid and Invitation is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mid America Apartment Communit and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes 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 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 Mid America i.e., Mid America and Invitation Homes go up and down completely randomly.
Pair Corralation between Mid America and Invitation Homes
Considering the 90-day investment horizon Mid America Apartment Communities is expected to generate 0.82 times more return on investment than Invitation Homes. However, Mid America Apartment Communities is 1.22 times less risky than Invitation Homes. It trades about 0.16 of its potential returns per unit of risk. Invitation Homes is currently generating about 0.01 per unit of risk. If you would invest 12,771 in Mid America Apartment Communities on August 24, 2024 and sell it today you would earn a total of 3,082 from holding Mid America Apartment Communities or generate 24.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid America Apartment Communit vs. Invitation Homes
Performance |
| Timeline |
| Mid America Apartment |
| Invitation Homes |
Mid America and Invitation Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid America and Invitation Homes
The main advantage of trading using opposite Mid America and Invitation Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid America 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.| Mid America vs. AvalonBay Communities | Mid America vs. Essex Property Trust | Mid America vs. Equity Residential | Mid America vs. UDR Inc |
| 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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