Correlation Between Invitation Homes and Wix

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

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

Diversification Opportunities for Invitation Homes and Wix

0.11

Correlation Coefficient

Invitation Homes  Wix

Average diversification

The 3 months correlation between Invitation and Wix is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Invitation Homes and Wix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wix 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 Wix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wix has no effect on the direction of Invitation Homes i.e., Invitation Homes and Wix go up and down completely randomly.

Pair Corralation between Invitation Homes and Wix

Assuming the 90 days trading horizon Invitation Homes is expected to generate 4.94 times less return on investment than Wix. But when comparing it to its historical volatility, Invitation Homes is 2.72 times less risky than Wix. It trades about 0.05 of its potential returns per unit of risk. Wix is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,469  in Wix on October 11, 2024 and sell it today you would earn a total of  3,046  from holding Wix or generate 207.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.33%
Values	Daily Returns

Invitation Homes  vs.  Wix

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.

Wix

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wix are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Wix sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invitation Homes and Wix

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

The idea behind Invitation Homes and Wix 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.