Correlation Between INVITATION HOMES and USWE SPORTS

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

Diversification Opportunities for INVITATION HOMES and USWE SPORTS

-0.5

Correlation Coefficient

INVITATION HOMES  USWE SPORTS

Very good diversification

The 3 months correlation between INVITATION and USWE is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB 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 USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and USWE SPORTS go up and down completely randomly.

Pair Corralation between INVITATION HOMES and USWE SPORTS

Assuming the 90 days horizon INVITATION HOMES DL is expected to generate 0.34 times more return on investment than USWE SPORTS. However, INVITATION HOMES DL is 2.97 times less risky than USWE SPORTS. It trades about 0.02 of its potential returns per unit of risk. USWE SPORTS AB is currently generating about -0.01 per unit of risk. If you would invest  2,759  in INVITATION HOMES DL on November 19, 2024 and sell it today you would earn a total of  241.00  from holding INVITATION HOMES DL or generate 8.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

INVITATION HOMES DL  vs.  USWE SPORTS AB

INVITATION HOMES

Risk-Adjusted Performance

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

USWE SPORTS AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, USWE SPORTS may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with INVITATION HOMES and USWE SPORTS

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

The idea behind INVITATION HOMES DL and USWE SPORTS AB 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.