Correlation Between AGNC Investment and American Homes
Can any of the company-specific risk be diversified away by investing in both AGNC Investment 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 AGNC Investment and American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AGNC Investment Corp and American Homes 4, you can compare the effects of market volatilities on AGNC Investment 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 AGNC Investment with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGNC Investment and American Homes.
Diversification Opportunities for AGNC Investment and American Homes
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AGNC and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp 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 AGNC Investment 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 AGNC Investment Corp 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 AGNC Investment i.e., AGNC Investment and American Homes go up and down completely randomly.
Pair Corralation between AGNC Investment and American Homes
Given the investment horizon of 90 days AGNC Investment Corp is expected to under-perform the American Homes. In addition to that, AGNC Investment is 1.34 times more volatile than American Homes 4. It trades about -0.19 of its total potential returns per unit of risk. American Homes 4 is currently generating about -0.14 per unit of volatility. If you would invest 3,622 in American Homes 4 on January 20, 2024 and sell it today you would lose (119.00) from holding American Homes 4 or give up 3.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AGNC Investment Corp vs. American Homes 4
Performance |
| Timeline |
| AGNC Investment Corp |
| American Homes 4 |
AGNC Investment and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AGNC Investment and American Homes
The main advantage of trading using opposite AGNC Investment and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC Investment 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 AGNC Investment Corp 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.| American Homes vs. Sun Communities | American Homes vs. Clipper Realty | American Homes vs. UDR Inc | American Homes vs. UMH Properties |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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