Correlation Between AEON STORES and INVITATION HOMES

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

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

Diversification Opportunities for AEON STORES and INVITATION HOMES

0.07

Correlation Coefficient

AEON STORES  INVITATION HOMES

Significant diversification

The 3 months correlation between AEON and INVITATION is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding AEON STORES and INVITATION HOMES DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVITATION HOMES and AEON STORES 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 AEON STORES 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 AEON STORES i.e., AEON STORES and INVITATION HOMES go up and down completely randomly.

Pair Corralation between AEON STORES and INVITATION HOMES

Assuming the 90 days trading horizon AEON STORES is expected to under-perform the INVITATION HOMES. But the stock apears to be less risky and, when comparing its historical volatility, AEON STORES is 1.83 times less risky than INVITATION HOMES. The stock trades about -0.13 of its potential returns per unit of risk. The INVITATION HOMES DL is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,160  in INVITATION HOMES DL on September 29, 2024 and sell it today you would lose (80.00) from holding INVITATION HOMES DL or give up 2.53% of portfolio value over 90 days.

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

AEON STORES  vs.  INVITATION HOMES DL

AEON STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

INVITATION HOMES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INVITATION HOMES DL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INVITATION HOMES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AEON STORES and INVITATION HOMES

The main advantage of trading using opposite AEON STORES and INVITATION HOMES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEON STORES 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's long position.

The idea behind AEON STORES and INVITATION HOMES DL 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.