Correlation Between Sun Communities and American Homes
Can any of the company-specific risk be diversified away by investing in both Sun Communities 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 Sun Communities and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Communities and American Homes 4, you can compare the effects of market volatilities on Sun Communities 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 Sun Communities with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Communities and American Homes.
Diversification Opportunities for Sun Communities and American Homes
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sun and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sun Communities 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 Sun Communities 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 Sun Communities 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 Sun Communities i.e., Sun Communities and American Homes go up and down completely randomly.
Pair Corralation between Sun Communities and American Homes
Assuming the 90 days horizon Sun Communities is expected to generate 0.82 times more return on investment than American Homes. However, Sun Communities is 1.22 times less risky than American Homes. It trades about 0.05 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 10,822 in Sun Communities on September 23, 2024 and sell it today you would earn a total of 978.00 from holding Sun Communities or generate 9.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Communities vs. American Homes 4
Performance |
| Timeline |
| Sun Communities |
| American Homes 4 |
Sun Communities and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Communities and American Homes
The main advantage of trading using opposite Sun Communities and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Communities 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.| Sun Communities vs. Equity Residential | Sun Communities vs. AvalonBay Communities | Sun Communities vs. UDR Inc | Sun Communities vs. INVITATION HOMES DL |
| American Homes vs. Equity Residential | American Homes vs. AvalonBay Communities | American Homes vs. UDR Inc | American Homes vs. INVITATION HOMES DL |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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