Correlation Between Invitation Homes and Verizon Communications

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

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

Diversification Opportunities for Invitation Homes and Verizon Communications

0.01

Correlation Coefficient

Invitation Homes  Verizon Communications

Significant diversification

The 3 months correlation between Invitation and Verizon is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Invitation Homes and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Invitation Homes i.e., Invitation Homes and Verizon Communications go up and down completely randomly.

Pair Corralation between Invitation Homes and Verizon Communications

Assuming the 90 days trading horizon Invitation Homes is expected to generate 1.53 times less return on investment than Verizon Communications. But when comparing it to its historical volatility, Invitation Homes is 1.97 times less risky than Verizon Communications. It trades about 0.1 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,052  in Verizon Communications on October 9, 2024 and sell it today you would earn a total of  968.00  from holding Verizon Communications or generate 31.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.37%
Values	Daily Returns

Invitation Homes  vs.  Verizon Communications

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.

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Verizon Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invitation Homes and Verizon Communications

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

The idea behind Invitation Homes and Verizon Communications 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.