Correlation Between Continental and INVITATION HOMES
Can any of the company-specific risk be diversified away by investing in both Continental 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 Continental and INVITATION HOMES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Camden Property Trust and INVITATION HOMES DL, you can compare the effects of market volatilities on Continental 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 Continental with a short position of INVITATION HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental and INVITATION HOMES.
Diversification Opportunities for Continental and INVITATION HOMES
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Continental and INVITATION is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Camden Property Trust and INVITATION HOMES DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVITATION HOMES and Continental 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 Camden Property Trust 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 Continental i.e., Continental and INVITATION HOMES go up and down completely randomly.
Pair Corralation between Continental and INVITATION HOMES
Assuming the 90 days horizon Camden Property Trust is expected to under-perform the INVITATION HOMES. In addition to that, Continental is 1.06 times more volatile than INVITATION HOMES DL. It trades about -0.27 of its total potential returns per unit of risk. INVITATION HOMES DL is currently generating about -0.18 per unit of volatility. If you would invest 3,200 in INVITATION HOMES DL on September 24, 2024 and sell it today you would lose (120.00) from holding INVITATION HOMES DL or give up 3.75% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Camden Property Trust vs. INVITATION HOMES DL
Performance |
Timeline |
Camden Property Trust |
INVITATION HOMES |
Continental and INVITATION HOMES Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Continental and INVITATION HOMES
The main advantage of trading using opposite Continental and INVITATION HOMES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental 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's long position.Continental vs. DATAGROUP SE | Continental vs. Sabra Health Care | Continental vs. Cardinal Health | Continental vs. Automatic Data Processing |
INVITATION HOMES vs. Perma Fix Environmental Services | INVITATION HOMES vs. JAPAN AIRLINES | INVITATION HOMES vs. LEGACY IRON ORE | INVITATION HOMES vs. GFL ENVIRONM |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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