Correlation Between Iron Mountain and Invitation Homes

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

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

Diversification Opportunities for Iron Mountain and Invitation Homes

0.09

Correlation Coefficient

Iron Mountain  Invitation Homes

Significant diversification

The 3 months correlation between Iron and Invitation is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Iron Mountain Incorporated and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes and Iron Mountain 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 Iron Mountain Incorporated 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 Iron Mountain i.e., Iron Mountain and Invitation Homes go up and down completely randomly.

Pair Corralation between Iron Mountain and Invitation Homes

Assuming the 90 days trading horizon Iron Mountain Incorporated is expected to under-perform the Invitation Homes. In addition to that, Iron Mountain is 3.11 times more volatile than Invitation Homes. It trades about -0.14 of its total potential returns per unit of risk. Invitation Homes is currently generating about -0.04 per unit of volatility. If you would invest  3,932  in Invitation Homes on October 27, 2024 and sell it today you would lose (43.00) from holding Invitation Homes or give up 1.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	70.69%
Values	Daily Returns

Iron Mountain Incorporated  vs.  Invitation Homes

Iron Mountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Mountain Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company 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 Iron Mountain and Invitation Homes

The main advantage of trading using opposite Iron Mountain and Invitation Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Mountain 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 Iron Mountain Incorporated 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.