Correlation Between Sendas Distribuidora and Invitation Homes

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

By analyzing existing cross correlation between Sendas Distribuidora SA and Invitation Homes, you can compare the effects of market volatilities on Sendas Distribuidora and Invitation 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 Sendas Distribuidora with a short position of Invitation Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sendas Distribuidora and Invitation Homes.

Diversification Opportunities for Sendas Distribuidora and Invitation Homes

-0.05

Correlation Coefficient

Sendas Distribuidora  Invitation Homes

Good diversification

The 3 months correlation between Sendas and Invitation is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sendas Distribuidora SA and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes and Sendas Distribuidora 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 Sendas Distribuidora SA are associated (or correlated) with Invitation Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invitation Homes has no effect on the direction of Sendas Distribuidora i.e., Sendas Distribuidora and Invitation Homes go up and down completely randomly.

Pair Corralation between Sendas Distribuidora and Invitation Homes

Assuming the 90 days trading horizon Sendas Distribuidora SA is expected to under-perform the Invitation Homes. In addition to that, Sendas Distribuidora is 4.29 times more volatile than Invitation Homes. It trades about -0.1 of its total potential returns per unit of risk. Invitation Homes is currently generating about -0.24 per unit of volatility. If you would invest  4,000  in Invitation Homes on October 11, 2024 and sell it today you would lose (111.00) from holding Invitation Homes or give up 2.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.16%
Values	Daily Returns

Sendas Distribuidora SA  vs.  Invitation Homes

Sendas Distribuidora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sendas Distribuidora SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Invitation Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invitation Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Invitation Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sendas Distribuidora and Invitation Homes

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

The idea behind Sendas Distribuidora SA and Invitation Homes 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.