Correlation Between Bet-at-home and American Homes

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

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

Diversification Opportunities for Bet-at-home and American Homes

-0.59

Correlation Coefficient

Bet-at-home  American Homes

Excellent diversification

The 3 months correlation between Bet-at-home and American is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding bet at home AG and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 and Bet-at-home 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 bet at home AG are associated (or correlated) with American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Bet-at-home i.e., Bet-at-home and American Homes go up and down completely randomly.

Pair Corralation between Bet-at-home and American Homes

Assuming the 90 days trading horizon bet at home AG is expected to under-perform the American Homes. In addition to that, Bet-at-home is 1.03 times more volatile than American Homes 4. It trades about -0.21 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.04 per unit of volatility. If you would invest  3,415  in American Homes 4 on October 2, 2024 and sell it today you would earn a total of  125.00  from holding American Homes 4 or generate 3.66% return on investment over 90 days.

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

bet at home AG  vs.  American Homes 4

bet at home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days bet at home AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

American Homes 4

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Homes 4 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Bet-at-home and American Homes

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

The idea behind bet at home AG and American Homes 4 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.