Correlation Between American Homes and Santander Bank

Can any of the company-specific risk be diversified away by investing in both American Homes and Santander Bank 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 American Homes and Santander Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Homes 4 and Santander Bank Polska, you can compare the effects of market volatilities on American Homes and Santander Bank 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 American Homes with a short position of Santander Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Santander Bank.

Diversification Opportunities for American Homes and Santander Bank

-0.09

Correlation Coefficient

American Homes  Santander Bank

Good diversification

The 3 months correlation between American and Santander is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska and American 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 American Homes 4 are associated (or correlated) with Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of American Homes i.e., American Homes and Santander Bank go up and down completely randomly.

Pair Corralation between American Homes and Santander Bank

Assuming the 90 days trading horizon American Homes 4 is expected to generate 0.74 times more return on investment than Santander Bank. However, American Homes 4 is 1.35 times less risky than Santander Bank. It trades about 0.06 of its potential returns per unit of risk. Santander Bank Polska is currently generating about 0.01 per unit of risk. If you would invest  3,316  in American Homes 4 on September 28, 2024 and sell it today you would earn a total of  204.00  from holding American Homes 4 or generate 6.15% return on investment over 90 days.

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

American Homes 4  vs.  Santander Bank Polska

American Homes 4

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Homes 4 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Homes may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Santander Bank Polska

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santander Bank Polska has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Santander Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Homes and Santander Bank

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

The idea behind American Homes 4 and Santander Bank Polska 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.