Correlation Between INVITATION HOMES and Indus Gas

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

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

Diversification Opportunities for INVITATION HOMES and Indus Gas

-0.14

Correlation Coefficient

INVITATION HOMES  Indus Gas

Good diversification

The 3 months correlation between INVITATION and Indus is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and Indus Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indus Gas and INVITATION 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 INVITATION HOMES DL are associated (or correlated) with Indus Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indus Gas has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and Indus Gas go up and down completely randomly.

Pair Corralation between INVITATION HOMES and Indus Gas

Assuming the 90 days horizon INVITATION HOMES is expected to generate 9034.33 times less return on investment than Indus Gas. But when comparing it to its historical volatility, INVITATION HOMES DL is 181.26 times less risky than Indus Gas. It trades about 0.01 of its potential returns per unit of risk. Indus Gas is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  8.40  in Indus Gas on December 24, 2024 and sell it today you would lose (3.55) from holding Indus Gas or give up 42.26% of portfolio value over 90 days.

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

INVITATION HOMES DL  vs.  Indus Gas

INVITATION HOMES

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INVITATION HOMES DL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INVITATION HOMES is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Indus Gas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indus Gas are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Indus Gas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INVITATION HOMES and Indus Gas

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

The idea behind INVITATION HOMES DL and Indus Gas 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.