Correlation Between Armada Hflr and Invitation Homes

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

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

Diversification Opportunities for Armada Hflr and Invitation Homes

0.68

Correlation Coefficient

Armada Hflr  Invitation Homes

Poor diversification

The 3 months correlation between Armada and Invitation is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes and Armada Hflr 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 Armada Hflr Pr 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 Armada Hflr i.e., Armada Hflr and Invitation Homes go up and down completely randomly.

Pair Corralation between Armada Hflr and Invitation Homes

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the Invitation Homes. In addition to that, Armada Hflr is 1.18 times more volatile than Invitation Homes. It trades about -0.12 of its total potential returns per unit of risk. Invitation Homes is currently generating about -0.14 per unit of volatility. If you would invest  3,576  in Invitation Homes on September 20, 2024 and sell it today you would lose (415.00) from holding Invitation Homes or give up 11.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Armada Hflr Pr  vs.  Invitation Homes

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Armada Hflr and Invitation Homes

The main advantage of trading using opposite Armada Hflr and Invitation Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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 Armada Hflr Pr 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.