Correlation Between United Homes and American

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

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

Diversification Opportunities for United Homes and American

-0.29

Correlation Coefficient

United Homes  American

Very good diversification

The 3 months correlation between United and American is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding United Homes Group and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and United 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 United Homes Group are associated (or correlated) with American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of United Homes i.e., United Homes and American go up and down completely randomly.

Pair Corralation between United Homes and American

Considering the 90-day investment horizon United Homes Group is expected to generate 8.92 times more return on investment than American. However, United Homes is 8.92 times more volatile than American Express Co. It trades about 0.01 of its potential returns per unit of risk. American Express Co is currently generating about -0.12 per unit of risk. If you would invest  614.00  in United Homes Group on September 4, 2024 and sell it today you would lose (7.00) from holding United Homes Group or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

United Homes Group  vs.  American Express Co

United Homes Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Homes Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, United Homes is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

American Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Express Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Homes and American

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

The idea behind United Homes Group and American Express Co 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.