Correlation Between INVITATION HOMES and COLUMBIA SPORTSWEAR

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

Diversification Opportunities for INVITATION HOMES and COLUMBIA SPORTSWEAR

0.41

Correlation Coefficient

INVITATION HOMES  COLUMBIA SPORTSWEAR

Very weak diversification

The 3 months correlation between INVITATION and COLUMBIA is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and COLUMBIA SPORTSWEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COLUMBIA SPORTSWEAR has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and COLUMBIA SPORTSWEAR go up and down completely randomly.

Pair Corralation between INVITATION HOMES and COLUMBIA SPORTSWEAR

Assuming the 90 days horizon INVITATION HOMES DL is expected to generate 0.99 times more return on investment than COLUMBIA SPORTSWEAR. However, INVITATION HOMES DL is 1.01 times less risky than COLUMBIA SPORTSWEAR. It trades about 0.02 of its potential returns per unit of risk. COLUMBIA SPORTSWEAR is currently generating about 0.01 per unit of risk. If you would invest  2,662  in INVITATION HOMES DL on October 12, 2024 and sell it today you would earn a total of  298.00  from holding INVITATION HOMES DL or generate 11.19% return on investment over 90 days.

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

INVITATION HOMES DL  vs.  COLUMBIA SPORTSWEAR

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.

COLUMBIA SPORTSWEAR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COLUMBIA SPORTSWEAR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, COLUMBIA SPORTSWEAR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with INVITATION HOMES and COLUMBIA SPORTSWEAR

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

The idea behind INVITATION HOMES DL and COLUMBIA SPORTSWEAR 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.