Correlation Between American Homes and Klépierre

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

Diversification Opportunities for American Homes and Klépierre

-0.34

Correlation Coefficient

American Homes  Klépierre

Very good diversification

The 3 months correlation between American and Klépierre is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Klpierre SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klpierre SA 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 Klépierre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klpierre SA has no effect on the direction of American Homes i.e., American Homes and Klépierre go up and down completely randomly.

Pair Corralation between American Homes and Klépierre

Assuming the 90 days trading horizon American Homes 4 is expected to under-perform the Klépierre. In addition to that, American Homes is 1.81 times more volatile than Klpierre SA. It trades about -0.04 of its total potential returns per unit of risk. Klpierre SA is currently generating about 0.19 per unit of volatility. If you would invest  2,700  in Klpierre SA on December 26, 2024 and sell it today you would earn a total of  338.00  from holding Klpierre SA or generate 12.52% 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.  Klpierre SA

American Homes 4

Risk-Adjusted Performance

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.

Klpierre SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Klpierre SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Klépierre may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with American Homes and Klépierre

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

The idea behind American Homes 4 and Klpierre SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..