Correlation Between Focus Home and American Homes
Can any of the company-specific risk be diversified away by investing in both Focus Home 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 Focus Home and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Focus Home Interactive and American Homes 4, you can compare the effects of market volatilities on Focus Home 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 Focus Home with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Home and American Homes.
Diversification Opportunities for Focus Home and American Homes
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Focus and American is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Focus Home Interactive 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 Focus Home 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 Focus Home Interactive 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 Focus Home i.e., Focus Home and American Homes go up and down completely randomly.
Pair Corralation between Focus Home and American Homes
Assuming the 90 days horizon Focus Home Interactive is expected to generate 2.91 times more return on investment than American Homes. However, Focus Home is 2.91 times more volatile than American Homes 4. It trades about 0.03 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.03 per unit of risk. If you would invest 1,602 in Focus Home Interactive on September 25, 2024 and sell it today you would earn a total of 266.00 from holding Focus Home Interactive or generate 16.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Focus Home Interactive vs. American Homes 4
Performance |
Timeline |
Focus Home Interactive |
American Homes 4 |
Focus Home and American Homes Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Focus Home and American Homes
The main advantage of trading using opposite Focus Home and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focus Home 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.Focus Home vs. Nintendo Co | Focus Home vs. Sea Limited | Focus Home vs. Electronic Arts | Focus Home vs. NEXON Co |
American Homes vs. MI Homes | American Homes vs. Fukuyama Transporting Co | American Homes vs. Focus Home Interactive | American Homes vs. Haverty Furniture Companies |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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