Correlation Between Fundo Invest and AvalonBay Communities

Can any of the company-specific risk be diversified away by investing in both Fundo Invest and AvalonBay Communities 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 Fundo Invest and AvalonBay Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fundo Invest Imobiliario and AvalonBay Communities, you can compare the effects of market volatilities on Fundo Invest and AvalonBay Communities 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 Fundo Invest with a short position of AvalonBay Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundo Invest and AvalonBay Communities.

Diversification Opportunities for Fundo Invest and AvalonBay Communities

-0.9

Correlation Coefficient

Fundo Invest  AvalonBay Communities

Pay attention - limited upside

The 3 months correlation between Fundo and AvalonBay is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fundo Invest Imobiliario and AvalonBay Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvalonBay Communities and Fundo Invest 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 Fundo Invest Imobiliario are associated (or correlated) with AvalonBay Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AvalonBay Communities has no effect on the direction of Fundo Invest i.e., Fundo Invest and AvalonBay Communities go up and down completely randomly.

Pair Corralation between Fundo Invest and AvalonBay Communities

Assuming the 90 days trading horizon Fundo Invest Imobiliario is expected to under-perform the AvalonBay Communities. In addition to that, Fundo Invest is 1.38 times more volatile than AvalonBay Communities. It trades about -0.12 of its total potential returns per unit of risk. AvalonBay Communities is currently generating about 0.17 per unit of volatility. If you would invest  24,816  in AvalonBay Communities on March 7, 2024 and sell it today you would earn a total of  1,384  from holding AvalonBay Communities or generate 5.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Fundo Invest Imobiliario  vs.  AvalonBay Communities

Fundo Invest Imobiliario

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundo Invest Imobiliario has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the fund investors.

AvalonBay Communities

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AvalonBay Communities are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AvalonBay Communities sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fundo Invest and AvalonBay Communities

The main advantage of trading using opposite Fundo Invest and AvalonBay Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundo Invest position performs unexpectedly, AvalonBay Communities 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 AvalonBay Communities will offset losses from the drop in AvalonBay Communities' long position.

The idea behind Fundo Invest Imobiliario and AvalonBay Communities 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.