Correlation Between Corporate Office and American Homes
Can any of the company-specific risk be diversified away by investing in both Corporate Office 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 Corporate Office and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corporate Office Properties and American Homes 4, you can compare the effects of market volatilities on Corporate Office 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 Corporate Office with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Office and American Homes.
Diversification Opportunities for Corporate Office and American Homes
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Corporate and American is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties 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 Corporate Office 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 Corporate Office Properties 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 Corporate Office i.e., Corporate Office and American Homes go up and down completely randomly.
Pair Corralation between Corporate Office and American Homes
Assuming the 90 days horizon Corporate Office is expected to generate 1.32 times less return on investment than American Homes. But when comparing it to its historical volatility, Corporate Office Properties is 1.38 times less risky than American Homes. It trades about 0.08 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,540 in American Homes 4 on August 29, 2024 and sell it today you would earn a total of 120.00 from holding American Homes 4 or generate 3.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Corporate Office Properties vs. American Homes 4
Performance |
| Timeline |
| Corporate Office Pro |
| American Homes 4 |
Corporate Office and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Corporate Office and American Homes
The main advantage of trading using opposite Corporate Office and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office 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.| Corporate Office vs. Superior Plus Corp | Corporate Office vs. NMI Holdings | Corporate Office vs. SIVERS SEMICONDUCTORS AB | Corporate Office vs. Talanx AG |
| American Homes vs. UDR Inc | American Homes vs. INVITATION HOMES DL | American Homes vs. Superior Plus Corp | American Homes vs. NMI Holdings |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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