Correlation Between NYSE Composite and American Homes
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and American Homes 4, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and American Homes.
Diversification Opportunities for NYSE Composite and American Homes
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NYSE and American is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and American Homes go up and down completely randomly.
Pair Corralation between NYSE Composite and American Homes
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.92 times more return on investment than American Homes. However, NYSE Composite is 1.09 times less risky than American Homes. It trades about 0.29 of its potential returns per unit of risk. American Homes 4 is currently generating about -0.15 per unit of risk. If you would invest 1,941,627 in NYSE Composite on August 31, 2024 and sell it today you would earn a total of 79,355 from holding NYSE Composite or generate 4.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. American Homes 4
Performance |
| Timeline |
NYSE Composite and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
American Homes 4
Pair trading matchups for American Homes
Pair Trading with NYSE Composite and American Homes
The main advantage of trading using opposite NYSE Composite and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Nextplat Corp | NYSE Composite vs. Qualys Inc | NYSE Composite vs. Cadence Design Systems | NYSE Composite vs. Asure Software |
| American Homes vs. Mid America Apartment Communities | American Homes vs. UMH Properties | American Homes vs. American Homes 4 | American Homes vs. American Homes 4 |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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