Correlation Between Bloomsbury Publishing and American Homes

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

By analyzing existing cross correlation between Bloomsbury Publishing Plc and American Homes 4, you can compare the effects of market volatilities on Bloomsbury Publishing 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 Bloomsbury Publishing with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloomsbury Publishing and American Homes.

Diversification Opportunities for Bloomsbury Publishing and American Homes

-0.25

Correlation Coefficient

Bloomsbury Publishing  American Homes

Very good diversification

The 3 months correlation between Bloomsbury and American is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bloomsbury Publishing Plc 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 Bloomsbury Publishing 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 Bloomsbury Publishing Plc 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 Bloomsbury Publishing i.e., Bloomsbury Publishing and American Homes go up and down completely randomly.

Pair Corralation between Bloomsbury Publishing and American Homes

Assuming the 90 days trading horizon Bloomsbury Publishing Plc is expected to under-perform the American Homes. In addition to that, Bloomsbury Publishing is 1.5 times more volatile than American Homes 4. It trades about -0.13 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.05 per unit of volatility. If you would invest  3,751  in American Homes 4 on September 13, 2024 and sell it today you would earn a total of  28.00  from holding American Homes 4 or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Bloomsbury Publishing Plc  vs.  American Homes 4

Bloomsbury Publishing Plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bloomsbury Publishing Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Bloomsbury Publishing is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

American Homes 4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Homes 4 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Pair Trading with Bloomsbury Publishing and American Homes

The main advantage of trading using opposite Bloomsbury Publishing and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bloomsbury Publishing 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.

The idea behind Bloomsbury Publishing Plc and American Homes 4 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.