Correlation Between American Homes and Austevoll Seafood

Can any of the company-specific risk be diversified away by investing in both American Homes and Austevoll Seafood 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 Austevoll Seafood 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 Austevoll Seafood ASA, you can compare the effects of market volatilities on American Homes and Austevoll Seafood 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 Austevoll Seafood. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Austevoll Seafood.

Diversification Opportunities for American Homes and Austevoll Seafood

0.11

Correlation Coefficient

American Homes  Austevoll Seafood

Average diversification

The 3 months correlation between American and Austevoll is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Austevoll Seafood ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austevoll Seafood ASA 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 Austevoll Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austevoll Seafood ASA has no effect on the direction of American Homes i.e., American Homes and Austevoll Seafood go up and down completely randomly.

Pair Corralation between American Homes and Austevoll Seafood

Assuming the 90 days trading horizon American Homes 4 is expected to under-perform the Austevoll Seafood. But the stock apears to be less risky and, when comparing its historical volatility, American Homes 4 is 1.07 times less risky than Austevoll Seafood. The stock trades about -0.09 of its potential returns per unit of risk. The Austevoll Seafood ASA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  9,733  in Austevoll Seafood ASA on September 21, 2024 and sell it today you would lose (145.00) from holding Austevoll Seafood ASA or give up 1.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

American Homes 4  vs.  Austevoll Seafood ASA

American Homes 4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Homes 4 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Austevoll Seafood ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Austevoll Seafood ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Austevoll Seafood is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with American Homes and Austevoll Seafood

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

The idea behind American Homes 4 and Austevoll Seafood ASA 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.