Correlation Between Invitation Homes and Camden Property

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

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

Diversification Opportunities for Invitation Homes and Camden Property

0.79

Correlation Coefficient

Invitation Homes  Camden Property

Poor diversification

The 3 months correlation between Invitation and Camden is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Invitation Homes and Camden Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camden Property Trust and Invitation Homes 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 Invitation Homes are associated (or correlated) with Camden Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camden Property Trust has no effect on the direction of Invitation Homes i.e., Invitation Homes and Camden Property go up and down completely randomly.

Pair Corralation between Invitation Homes and Camden Property

Given the investment horizon of 90 days Invitation Homes is expected to under-perform the Camden Property. In addition to that, Invitation Homes is 1.12 times more volatile than Camden Property Trust. It trades about -0.14 of its total potential returns per unit of risk. Camden Property Trust is currently generating about -0.11 per unit of volatility. If you would invest  12,417  in Camden Property Trust on September 20, 2024 and sell it today you would lose (1,082) from holding Camden Property Trust or give up 8.71% of portfolio value over 90 days.

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

Invitation Homes  vs.  Camden Property Trust

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.

Camden Property Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Camden Property Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Invitation Homes and Camden Property

The main advantage of trading using opposite Invitation Homes and Camden Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invitation Homes position performs unexpectedly, Camden Property 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 Camden Property will offset losses from the drop in Camden Property's long position.

The idea behind Invitation Homes and Camden Property Trust 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.