Correlation Between American Homes and Abingdon Health

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

Diversification Opportunities for American Homes and Abingdon Health

-0.13

Correlation Coefficient

American Homes  Abingdon Health

Good diversification

The 3 months correlation between American and Abingdon is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Abingdon Health Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abingdon Health Plc 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 Abingdon Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abingdon Health Plc has no effect on the direction of American Homes i.e., American Homes and Abingdon Health go up and down completely randomly.

Pair Corralation between American Homes and Abingdon Health

Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.49 times more return on investment than Abingdon Health. However, American Homes 4 is 2.02 times less risky than Abingdon Health. It trades about 0.01 of its potential returns per unit of risk. Abingdon Health Plc is currently generating about -0.09 per unit of risk. If you would invest  3,664  in American Homes 4 on December 26, 2024 and sell it today you would earn a total of  13.00  from holding American Homes 4 or generate 0.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

American Homes 4  vs.  Abingdon Health Plc

American Homes 4

Risk-Adjusted Performance

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 comparatively stable basic indicators, American Homes is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Abingdon Health Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Abingdon Health Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with American Homes and Abingdon Health

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

The idea behind American Homes 4 and Abingdon Health Plc 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 Commodity Directory module to find actively traded commodities issued by global exchanges.