Correlation Between COPT Defense and Invitation Homes

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

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

Diversification Opportunities for COPT Defense and Invitation Homes

-0.61

Correlation Coefficient

COPT Defense  Invitation Homes

Excellent diversification

The 3 months correlation between COPT and Invitation is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding COPT Defense Properties and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes and COPT Defense 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 COPT Defense Properties 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 COPT Defense i.e., COPT Defense and Invitation Homes go up and down completely randomly.

Pair Corralation between COPT Defense and Invitation Homes

Considering the 90-day investment horizon COPT Defense Properties is expected to generate 1.07 times more return on investment than Invitation Homes. However, COPT Defense is 1.07 times more volatile than Invitation Homes. It trades about 0.05 of its potential returns per unit of risk. Invitation Homes is currently generating about 0.03 per unit of risk. If you would invest  2,392  in COPT Defense Properties on September 19, 2024 and sell it today you would earn a total of  822.00  from holding COPT Defense Properties or generate 34.36% return on investment over 90 days.

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

COPT Defense Properties  vs.  Invitation Homes

COPT Defense Properties

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COPT Defense Properties are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, COPT Defense may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 COPT Defense and Invitation Homes

The main advantage of trading using opposite COPT Defense and Invitation Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COPT Defense 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 COPT Defense Properties 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.