Correlation Between BOOM LOGISTICS and American Homes

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

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

Diversification Opportunities for BOOM LOGISTICS and American Homes

0.06

Correlation Coefficient

BOOM LOGISTICS  American Homes

Significant diversification

The 3 months correlation between BOOM and American is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding BOOM LOGISTICS LTD 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 BOOM LOGISTICS 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 BOOM LOGISTICS LTD 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 BOOM LOGISTICS i.e., BOOM LOGISTICS and American Homes go up and down completely randomly.

Pair Corralation between BOOM LOGISTICS and American Homes

Assuming the 90 days horizon BOOM LOGISTICS LTD is expected to generate 2.82 times more return on investment than American Homes. However, BOOM LOGISTICS is 2.82 times more volatile than American Homes 4. It trades about 0.06 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.12 per unit of risk. If you would invest  77.00  in BOOM LOGISTICS LTD on October 7, 2024 and sell it today you would earn a total of  5.00  from holding BOOM LOGISTICS LTD or generate 6.49% return on investment over 90 days.

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

BOOM LOGISTICS LTD  vs.  American Homes 4

BOOM LOGISTICS LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BOOM LOGISTICS LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, BOOM LOGISTICS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

American Homes 4

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Homes 4 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, American Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BOOM LOGISTICS and American Homes

The main advantage of trading using opposite BOOM LOGISTICS and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOOM LOGISTICS 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 BOOM LOGISTICS LTD 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.