Correlation Between American Homes and Uniti

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

Diversification Opportunities for American Homes and Uniti

-0.37

Correlation Coefficient

American Homes  Uniti

Very good diversification

The 3 months correlation between American and Uniti is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Uniti Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniti Group 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 Uniti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniti Group has no effect on the direction of American Homes i.e., American Homes and Uniti go up and down completely randomly.

Pair Corralation between American Homes and Uniti

Considering the 90-day investment horizon American Homes 4 is expected to under-perform the Uniti. But the stock apears to be less risky and, when comparing its historical volatility, American Homes 4 is 2.71 times less risky than Uniti. The stock trades about -0.03 of its potential returns per unit of risk. The Uniti Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  435.00  in Uniti Group on September 2, 2024 and sell it today you would earn a total of  156.00  from holding Uniti Group or generate 35.86% 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.  Uniti Group

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 fairly strong primary indicators, American Homes is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Uniti Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Uniti Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Uniti unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Homes and Uniti

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

The idea behind American Homes 4 and Uniti Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .