Correlation Between DATAGROUP and American Homes

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

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

Diversification Opportunities for DATAGROUP and American Homes

0.34

Correlation Coefficient

DATAGROUP  American Homes

Weak diversification

The 3 months correlation between DATAGROUP and American is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding DATAGROUP SE 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 DATAGROUP 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 DATAGROUP SE 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 DATAGROUP i.e., DATAGROUP and American Homes go up and down completely randomly.

Pair Corralation between DATAGROUP and American Homes

Assuming the 90 days trading horizon DATAGROUP SE is expected to generate 1.35 times more return on investment than American Homes. However, DATAGROUP is 1.35 times more volatile than American Homes 4. It trades about 0.11 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.02 per unit of risk. If you would invest  3,915  in DATAGROUP SE on September 23, 2024 and sell it today you would earn a total of  685.00  from holding DATAGROUP SE or generate 17.5% return on investment over 90 days.

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

DATAGROUP SE  vs.  American Homes 4

DATAGROUP SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, DATAGROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

American Homes 4

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Homes 4 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, American 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 DATAGROUP and American Homes

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

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.