Correlation Between INVITATION HOMES and ACCOR SPADR

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

Diversification Opportunities for INVITATION HOMES and ACCOR SPADR

-0.28

Correlation Coefficient

INVITATION HOMES  ACCOR SPADR

Very good diversification

The 3 months correlation between INVITATION and ACCOR is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and ACCOR SPADR NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACCOR SPADR NEW 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 ACCOR SPADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACCOR SPADR NEW has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and ACCOR SPADR go up and down completely randomly.

Pair Corralation between INVITATION HOMES and ACCOR SPADR

Assuming the 90 days horizon INVITATION HOMES DL is expected to under-perform the ACCOR SPADR. In addition to that, INVITATION HOMES is 1.16 times more volatile than ACCOR SPADR NEW. It trades about 0.0 of its total potential returns per unit of risk. ACCOR SPADR NEW is currently generating about 0.15 per unit of volatility. If you would invest  755.00  in ACCOR SPADR NEW on August 31, 2024 and sell it today you would earn a total of  100.00  from holding ACCOR SPADR NEW or generate 13.25% return on investment over 90 days.

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

INVITATION HOMES DL  vs.  ACCOR SPADR NEW

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.

ACCOR SPADR NEW

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ACCOR SPADR NEW are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ACCOR SPADR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INVITATION HOMES and ACCOR SPADR

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

The idea behind INVITATION HOMES DL and ACCOR SPADR NEW 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.