Correlation Between Optima Health and American Homes
Can any of the company-specific risk be diversified away by investing in both Optima Health 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 Optima Health and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Optima Health plc and American Homes 4, you can compare the effects of market volatilities on Optima Health 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 Optima Health with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Health and American Homes.
Diversification Opportunities for Optima Health and American Homes
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Optima and American is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc 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 Optima Health 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 Optima Health plc 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 Optima Health i.e., Optima Health and American Homes go up and down completely randomly.
Pair Corralation between Optima Health and American Homes
Assuming the 90 days trading horizon Optima Health plc is expected to generate 0.71 times more return on investment than American Homes. However, Optima Health plc is 1.41 times less risky than American Homes. It trades about -0.18 of its potential returns per unit of risk. American Homes 4 is currently generating about -0.2 per unit of risk. If you would invest 15,750 in Optima Health plc on October 26, 2024 and sell it today you would lose (1,050) from holding Optima Health plc or give up 6.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 92.68% |
| Values | Daily Returns |
Optima Health plc vs. American Homes 4
Performance |
| Timeline |
| Optima Health plc |
| American Homes 4 |
Optima Health and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optima Health and American Homes
The main advantage of trading using opposite Optima Health and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optima Health 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.| Optima Health vs. Schroders Investment Trusts | Optima Health vs. Smithson Investment Trust | Optima Health vs. Lindsell Train Investment | Optima Health vs. Molson Coors Beverage |
| American Homes vs. Teradata Corp | American Homes vs. Gruppo MutuiOnline SpA | American Homes vs. Optima Health plc | American Homes vs. Vulcan Materials Co |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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