Correlation Between Invitation Homes and ConocoPhillips

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

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

Diversification Opportunities for Invitation Homes and ConocoPhillips

0.18

Correlation Coefficient

Invitation Homes  ConocoPhillips

Average diversification

The 3 months correlation between Invitation and ConocoPhillips is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Invitation Homes and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Invitation Homes 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 Invitation Homes are associated (or correlated) with ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Invitation Homes i.e., Invitation Homes and ConocoPhillips go up and down completely randomly.

Pair Corralation between Invitation Homes and ConocoPhillips

Assuming the 90 days trading horizon Invitation Homes is expected to under-perform the ConocoPhillips. But the stock apears to be less risky and, when comparing its historical volatility, Invitation Homes is 3.18 times less risky than ConocoPhillips. The stock trades about -0.04 of its potential returns per unit of risk. The ConocoPhillips is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,927  in ConocoPhillips on October 24, 2024 and sell it today you would earn a total of  223.00  from holding ConocoPhillips or generate 4.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	72.88%
Values	Daily Returns

Invitation Homes  vs.  ConocoPhillips

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.

ConocoPhillips

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ConocoPhillips is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invitation Homes and ConocoPhillips

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

The idea behind Invitation Homes and ConocoPhillips 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.