Correlation Between American Homes and Apartment Investment
Can any of the company-specific risk be diversified away by investing in both American Homes and Apartment Investment 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 American Homes and Apartment Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Homes 4 and Apartment Investment and, you can compare the effects of market volatilities on American Homes and Apartment Investment 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 American Homes with a short position of Apartment Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Apartment Investment.
Diversification Opportunities for American Homes and Apartment Investment
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Apartment is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Apartment Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apartment Investment and and American Homes 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 American Homes 4 are associated (or correlated) with Apartment Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apartment Investment and has no effect on the direction of American Homes i.e., American Homes and Apartment Investment go up and down completely randomly.
Pair Corralation between American Homes and Apartment Investment
Considering the 90-day investment horizon American Homes 4 is expected to under-perform the Apartment Investment. But the stock apears to be less risky and, when comparing its historical volatility, American Homes 4 is 1.91 times less risky than Apartment Investment. The stock trades about -0.05 of its potential returns per unit of risk. The Apartment Investment and is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 801.00 in Apartment Investment and on January 25, 2024 and sell it today you would earn a total of 3.00 from holding Apartment Investment and or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. Apartment Investment and
Performance |
| Timeline |
| American Homes 4 |
| Apartment Investment and |
American Homes and Apartment Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Apartment Investment
The main advantage of trading using opposite American Homes and Apartment Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Apartment Investment 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 Apartment Investment will offset losses from the drop in Apartment Investment's long position.| American Homes vs. Sun Communities | American Homes vs. Clipper Realty | American Homes vs. UDR Inc | American Homes vs. UMH Properties |
| Apartment Investment vs. Clipper Realty | Apartment Investment vs. Independence Realty Trust | Apartment Investment vs. BRT Realty Trust | Apartment Investment vs. UDR Inc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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