Correlation Between INVITATION HOMES and Strategic Education

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

Diversification Opportunities for INVITATION HOMES and Strategic Education

0.54

Correlation Coefficient

INVITATION HOMES  Strategic Education

Very weak diversification

The 3 months correlation between INVITATION and Strategic is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education 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 Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and Strategic Education go up and down completely randomly.

Pair Corralation between INVITATION HOMES and Strategic Education

Assuming the 90 days horizon INVITATION HOMES DL is expected to generate 0.69 times more return on investment than Strategic Education. However, INVITATION HOMES DL is 1.45 times less risky than Strategic Education. It trades about -0.12 of its potential returns per unit of risk. Strategic Education is currently generating about -0.09 per unit of risk. If you would invest  3,130  in INVITATION HOMES DL on October 11, 2024 and sell it today you would lose (150.00) from holding INVITATION HOMES DL or give up 4.79% of portfolio value over 90 days.

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

INVITATION HOMES DL  vs.  Strategic Education

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

Strategic Education

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Strategic Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INVITATION HOMES and Strategic Education

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

The idea behind INVITATION HOMES DL and Strategic Education 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.