Correlation Between Fulcrum Metals and American Homes

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

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

Diversification Opportunities for Fulcrum Metals and American Homes

0.54

Correlation Coefficient

Fulcrum Metals  American Homes

Very weak diversification

The 3 months correlation between Fulcrum and American is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Metals PLC 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 Fulcrum Metals 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 Fulcrum Metals PLC 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 Fulcrum Metals i.e., Fulcrum Metals and American Homes go up and down completely randomly.

Pair Corralation between Fulcrum Metals and American Homes

Assuming the 90 days trading horizon Fulcrum Metals PLC is expected to under-perform the American Homes. In addition to that, Fulcrum Metals is 3.94 times more volatile than American Homes 4. It trades about -0.19 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  3,905  in American Homes 4 on September 4, 2024 and sell it today you would lose (144.00) from holding American Homes 4 or give up 3.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Fulcrum Metals PLC  vs.  American Homes 4

Fulcrum Metals PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fulcrum Metals PLC 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. In spite of comparatively stable basic indicators, American Homes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fulcrum Metals and American Homes

The main advantage of trading using opposite Fulcrum Metals and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fulcrum Metals 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 Fulcrum Metals PLC 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.