Correlation Between INVITATION HOMES and FOSTOURGRP EO-0001

Can any of the company-specific risk be diversified away by investing in both INVITATION HOMES and FOSTOURGRP EO-0001 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 FOSTOURGRP EO-0001 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 FOSTOURGRP EO 0001, you can compare the effects of market volatilities on INVITATION HOMES and FOSTOURGRP EO-0001 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 FOSTOURGRP EO-0001. Check out your portfolio center. Please also check ongoing floating volatility patterns of INVITATION HOMES and FOSTOURGRP EO-0001.

Diversification Opportunities for INVITATION HOMES and FOSTOURGRP EO-0001

0.3

Correlation Coefficient

INVITATION HOMES  FOSTOURGRP EO-0001

Weak diversification

The 3 months correlation between INVITATION and FOSTOURGRP is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and FOSTOURGRP EO 0001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FOSTOURGRP EO 0001 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 FOSTOURGRP EO-0001. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FOSTOURGRP EO 0001 has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and FOSTOURGRP EO-0001 go up and down completely randomly.

Pair Corralation between INVITATION HOMES and FOSTOURGRP EO-0001

Assuming the 90 days horizon INVITATION HOMES is expected to generate 2.33 times less return on investment than FOSTOURGRP EO-0001. In addition to that, INVITATION HOMES is 1.86 times more volatile than FOSTOURGRP EO 0001. It trades about 0.02 of its total potential returns per unit of risk. FOSTOURGRP EO 0001 is currently generating about 0.08 per unit of volatility. If you would invest  89.00  in FOSTOURGRP EO 0001 on December 22, 2024 and sell it today you would earn a total of  3.00  from holding FOSTOURGRP EO 0001 or generate 3.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

INVITATION HOMES DL  vs.  FOSTOURGRP EO 0001

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

FOSTOURGRP EO 0001

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FOSTOURGRP EO 0001 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FOSTOURGRP EO-0001 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with INVITATION HOMES and FOSTOURGRP EO-0001

The main advantage of trading using opposite INVITATION HOMES and FOSTOURGRP EO-0001 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INVITATION HOMES position performs unexpectedly, FOSTOURGRP EO-0001 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 FOSTOURGRP EO-0001 will offset losses from the drop in FOSTOURGRP EO-0001's long position.

The idea behind INVITATION HOMES DL and FOSTOURGRP EO 0001 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.