Correlation Between Power REIT and American Homes
Can any of the company-specific risk be diversified away by investing in both Power REIT 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 Power REIT and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power REIT and American Homes 4, you can compare the effects of market volatilities on Power REIT 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 Power REIT with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power REIT and American Homes.
Diversification Opportunities for Power REIT and American Homes
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Power and American is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT 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 Power REIT 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 Power REIT 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 Power REIT i.e., Power REIT and American Homes go up and down completely randomly.
Pair Corralation between Power REIT and American Homes
Allowing for the 90-day total investment horizon Power REIT is expected to generate 11.0 times more return on investment than American Homes. However, Power REIT is 11.0 times more volatile than American Homes 4. It trades about 0.01 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.03 per unit of risk. If you would invest 495.00 in Power REIT on August 27, 2024 and sell it today you would lose (390.00) from holding Power REIT or give up 78.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power REIT vs. American Homes 4
Performance |
| Timeline |
| Power REIT |
| American Homes 4 |
Power REIT and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power REIT and American Homes
The main advantage of trading using opposite Power REIT and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT 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.| Power REIT vs. Broadstone Net Lease | Power REIT vs. Armada Hflr Pr | Power REIT vs. Brightspire Capital | Power REIT vs. Safehold |
| American Homes vs. American Homes 4 | American Homes vs. BRT Realty Trust | American Homes vs. Nexpoint Residential Trust | American Homes vs. Centerspace |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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