Correlation Between INVITATION HOMES and KENEDIX OFFICE

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

Diversification Opportunities for INVITATION HOMES and KENEDIX OFFICE

0.23

Correlation Coefficient

INVITATION HOMES  KENEDIX OFFICE

Modest diversification

The 3 months correlation between INVITATION and KENEDIX is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and KENEDIX OFFICE INV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KENEDIX OFFICE INV 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 KENEDIX OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KENEDIX OFFICE INV has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and KENEDIX OFFICE go up and down completely randomly.

Pair Corralation between INVITATION HOMES and KENEDIX OFFICE

Assuming the 90 days horizon INVITATION HOMES is expected to generate 3.14 times less return on investment than KENEDIX OFFICE. But when comparing it to its historical volatility, INVITATION HOMES DL is 1.34 times less risky than KENEDIX OFFICE. It trades about 0.01 of its potential returns per unit of risk. KENEDIX OFFICE INV is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  88,500  in KENEDIX OFFICE INV on December 24, 2024 and sell it today you would earn a total of  2,500  from holding KENEDIX OFFICE INV or generate 2.82% return on investment over 90 days.

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

INVITATION HOMES DL  vs.  KENEDIX OFFICE INV

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

KENEDIX OFFICE INV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KENEDIX OFFICE INV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KENEDIX OFFICE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with INVITATION HOMES and KENEDIX OFFICE

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

The idea behind INVITATION HOMES DL and KENEDIX OFFICE INV 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.