Correlation Between INVITATION HOMES and Digital Bros

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

Diversification Opportunities for INVITATION HOMES and Digital Bros

-0.06

Correlation Coefficient

INVITATION HOMES  Digital Bros

Good diversification

The 3 months correlation between INVITATION and Digital is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and Digital Bros SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Bros SpA 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 Digital Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Bros SpA has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and Digital Bros go up and down completely randomly.

Pair Corralation between INVITATION HOMES and Digital Bros

Assuming the 90 days horizon INVITATION HOMES DL is expected to under-perform the Digital Bros. But the stock apears to be less risky and, when comparing its historical volatility, INVITATION HOMES DL is 3.77 times less risky than Digital Bros. The stock trades about -0.18 of its potential returns per unit of risk. The Digital Bros SpA is currently generating about 0.54 of returns per unit of risk over similar time horizon. If you would invest  949.00  in Digital Bros SpA on October 9, 2024 and sell it today you would earn a total of  271.00  from holding Digital Bros SpA or generate 28.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

INVITATION HOMES DL  vs.  Digital Bros SpA

INVITATION HOMES

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INVITATION HOMES DL are ranked lower than 2 (%) 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.

Digital Bros SpA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Bros SpA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Digital Bros reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INVITATION HOMES and Digital Bros

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

The idea behind INVITATION HOMES DL and Digital Bros SpA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.