Correlation Between American Homes and CANON MARKETING

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

Diversification Opportunities for American Homes and CANON MARKETING

0.39

Correlation Coefficient

American Homes  CANON MARKETING

Weak diversification

The 3 months correlation between American and CANON is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and CANON MARKETING JP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANON MARKETING JP 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 CANON MARKETING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANON MARKETING JP has no effect on the direction of American Homes i.e., American Homes and CANON MARKETING go up and down completely randomly.

Pair Corralation between American Homes and CANON MARKETING

Assuming the 90 days trading horizon American Homes is expected to generate 1.93 times less return on investment than CANON MARKETING. In addition to that, American Homes is 1.17 times more volatile than CANON MARKETING JP. It trades about 0.02 of its total potential returns per unit of risk. CANON MARKETING JP is currently generating about 0.05 per unit of volatility. If you would invest  2,300  in CANON MARKETING JP on October 24, 2024 and sell it today you would earn a total of  660.00  from holding CANON MARKETING JP or generate 28.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.76%
Values	Daily Returns

American Homes 4  vs.  CANON MARKETING JP

American Homes 4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Homes 4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CANON MARKETING JP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CANON MARKETING JP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking indicators, CANON MARKETING unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Homes and CANON MARKETING

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

The idea behind American Homes 4 and CANON MARKETING JP 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.