Correlation Between Snap and INVITATION HOMES
Can any of the company-specific risk be diversified away by investing in both Snap and INVITATION 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 Snap and INVITATION HOMES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and INVITATION HOMES DL, you can compare the effects of market volatilities on Snap and INVITATION 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 Snap with a short position of INVITATION HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and INVITATION HOMES.
Diversification Opportunities for Snap and INVITATION HOMES
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Snap and INVITATION is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and INVITATION HOMES DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVITATION HOMES and Snap 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 Snap Inc are associated (or correlated) with INVITATION HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVITATION HOMES has no effect on the direction of Snap i.e., Snap and INVITATION HOMES go up and down completely randomly.
Pair Corralation between Snap and INVITATION HOMES
Given the investment horizon of 90 days Snap Inc is expected to generate 2.06 times more return on investment than INVITATION HOMES. However, Snap is 2.06 times more volatile than INVITATION HOMES DL. It trades about 0.11 of its potential returns per unit of risk. INVITATION HOMES DL is currently generating about 0.02 per unit of risk. If you would invest 942.00 in Snap Inc on August 25, 2024 and sell it today you would earn a total of 200.00 from holding Snap Inc or generate 21.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Snap Inc vs. INVITATION HOMES DL
Performance |
| Timeline |
| Snap Inc |
| INVITATION HOMES |
Snap and INVITATION HOMES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and INVITATION HOMES
The main advantage of trading using opposite Snap and INVITATION HOMES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, INVITATION 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 INVITATION HOMES will offset losses from the drop in INVITATION HOMES's long position.The idea behind Snap Inc and INVITATION HOMES DL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| INVITATION HOMES vs. Fast Retailing Co | INVITATION HOMES vs. Verizon Communications | INVITATION HOMES vs. Iridium Communications | INVITATION HOMES vs. China Communications Services |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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