Correlation Between Brinks and American Homes
Can any of the company-specific risk be diversified away by investing in both Brinks 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 Brinks and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Brinks and American Homes 4, you can compare the effects of market volatilities on Brinks 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 Brinks with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinks and American Homes.
Diversification Opportunities for Brinks and American Homes
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Brinks and American is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Brinks 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 Brinks 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 The Brinks 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 Brinks i.e., Brinks and American Homes go up and down completely randomly.
Pair Corralation between Brinks and American Homes
Assuming the 90 days horizon The Brinks is expected to generate 1.06 times more return on investment than American Homes. However, Brinks is 1.06 times more volatile than American Homes 4. It trades about 0.03 of its potential returns per unit of risk. American Homes 4 is currently generating about -0.01 per unit of risk. If you would invest 8,550 in The Brinks on October 17, 2024 and sell it today you would earn a total of 100.00 from holding The Brinks or generate 1.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Brinks vs. American Homes 4
Performance |
| Timeline |
| Brinks |
| American Homes 4 |
Brinks and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brinks and American Homes
The main advantage of trading using opposite Brinks and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinks 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.| Brinks vs. American Homes 4 | Brinks vs. Columbia Sportswear | Brinks vs. Air Transport Services | Brinks vs. CENTURIA OFFICE REIT |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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