Correlation Between Dream Residential and Bluerock Homes

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

By analyzing existing cross correlation between Dream Residential Real and Bluerock Homes Trust, you can compare the effects of market volatilities on Dream Residential and Bluerock 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 Dream Residential with a short position of Bluerock Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Residential and Bluerock Homes.

Diversification Opportunities for Dream Residential and Bluerock Homes

0.76

Correlation Coefficient

Dream Residential  Bluerock Homes

Poor diversification

The 3 months correlation between Dream and Bluerock is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dream Residential Real and Bluerock Homes Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluerock Homes Trust and Dream Residential 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 Dream Residential Real are associated (or correlated) with Bluerock Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluerock Homes Trust has no effect on the direction of Dream Residential i.e., Dream Residential and Bluerock Homes go up and down completely randomly.

Pair Corralation between Dream Residential and Bluerock Homes

Assuming the 90 days horizon Dream Residential Real is expected to generate 1.54 times more return on investment than Bluerock Homes. However, Dream Residential is 1.54 times more volatile than Bluerock Homes Trust. It trades about -0.06 of its potential returns per unit of risk. Bluerock Homes Trust is currently generating about -0.24 per unit of risk. If you would invest  651.00  in Dream Residential Real on October 9, 2024 and sell it today you would lose (21.00) from holding Dream Residential Real or give up 3.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Dream Residential Real  vs.  Bluerock Homes Trust

Dream Residential Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dream Residential Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Bluerock Homes Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bluerock Homes Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dream Residential and Bluerock Homes

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

The idea behind Dream Residential Real and Bluerock Homes Trust 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.