Correlation Between Axway Software and American Homes

Can any of the company-specific risk be diversified away by investing in both Axway Software and American Homes 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 Axway Software and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axway Software SA and American Homes 4, you can compare the effects of market volatilities on Axway Software and American Homes 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 Axway Software with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axway Software and American Homes.

Diversification Opportunities for Axway Software and American Homes

-0.06

Correlation Coefficient

Axway Software  American Homes

Good diversification

The 3 months correlation between Axway and American is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Axway Software SA and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 and Axway Software 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 Axway Software SA are associated (or correlated) with American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Axway Software i.e., Axway Software and American Homes go up and down completely randomly.

Pair Corralation between Axway Software and American Homes

Assuming the 90 days trading horizon Axway Software SA is expected to generate 0.54 times more return on investment than American Homes. However, Axway Software SA is 1.84 times less risky than American Homes. It trades about 0.01 of its potential returns per unit of risk. American Homes 4 is currently generating about -0.01 per unit of risk. If you would invest  2,650  in Axway Software SA on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Axway Software SA or generate 0.0% return on investment over 90 days.

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

Axway Software SA  vs.  American Homes 4

Axway Software SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. Despite nearly stable basic indicators, American Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Axway Software and American Homes

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

The idea behind Axway Software SA and American Homes 4 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 Channel module to use Commodity Channel Index to analyze current equity momentum.