Correlation Between American Homes and Impax Asset

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

Diversification Opportunities for American Homes and Impax Asset

0.46

Correlation Coefficient

American Homes  Impax Asset

Very weak diversification

The 3 months correlation between American and Impax is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Impax Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impax Asset Management 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 Impax Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impax Asset Management has no effect on the direction of American Homes i.e., American Homes and Impax Asset go up and down completely randomly.

Pair Corralation between American Homes and Impax Asset

Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.7 times more return on investment than Impax Asset. However, American Homes 4 is 1.43 times less risky than Impax Asset. It trades about 0.0 of its potential returns per unit of risk. Impax Asset Management is currently generating about -0.08 per unit of risk. If you would invest  3,662  in American Homes 4 on December 24, 2024 and sell it today you would lose (29.00) from holding American Homes 4 or give up 0.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.55%
Values	Daily Returns

American Homes 4  vs.  Impax Asset Management

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Impax Asset Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Impax Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with American Homes and Impax Asset

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

The idea behind American Homes 4 and Impax Asset Management 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.