Correlation Between HAVERTY FURNITURE and INVITATION HOMES

Can any of the company-specific risk be diversified away by investing in both HAVERTY FURNITURE and INVITATION 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 HAVERTY FURNITURE and INVITATION HOMES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HAVERTY FURNITURE A and INVITATION HOMES DL, you can compare the effects of market volatilities on HAVERTY FURNITURE and INVITATION 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 HAVERTY FURNITURE with a short position of INVITATION HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of HAVERTY FURNITURE and INVITATION HOMES.

Diversification Opportunities for HAVERTY FURNITURE and INVITATION HOMES

0.25

Correlation Coefficient

HAVERTY FURNITURE  INVITATION HOMES

Modest diversification

The 3 months correlation between HAVERTY and INVITATION is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding HAVERTY FURNITURE A and INVITATION HOMES DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVITATION HOMES and HAVERTY FURNITURE 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 HAVERTY FURNITURE A are associated (or correlated) with INVITATION HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVITATION HOMES has no effect on the direction of HAVERTY FURNITURE i.e., HAVERTY FURNITURE and INVITATION HOMES go up and down completely randomly.

Pair Corralation between HAVERTY FURNITURE and INVITATION HOMES

Assuming the 90 days trading horizon HAVERTY FURNITURE A is expected to under-perform the INVITATION HOMES. In addition to that, HAVERTY FURNITURE is 1.83 times more volatile than INVITATION HOMES DL. It trades about -0.04 of its total potential returns per unit of risk. INVITATION HOMES DL is currently generating about -0.05 per unit of volatility. If you would invest  3,190  in INVITATION HOMES DL on October 23, 2024 and sell it today you would lose (150.00) from holding INVITATION HOMES DL or give up 4.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HAVERTY FURNITURE A  vs.  INVITATION HOMES DL

HAVERTY FURNITURE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HAVERTY FURNITURE A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

INVITATION HOMES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INVITATION HOMES DL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INVITATION 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 HAVERTY FURNITURE and INVITATION HOMES

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

The idea behind HAVERTY FURNITURE A and INVITATION HOMES DL 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.