Correlation Between Equity Residential and Invitation Homes

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Can any of the company-specific risk be diversified away by investing in both Equity Residential 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 Equity Residential and Invitation Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Residential and Invitation Homes, you can compare the effects of market volatilities on Equity Residential 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 Equity Residential with a short position of Invitation Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Residential and Invitation Homes.

Diversification Opportunities for Equity Residential and Invitation Homes

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Equity and Invitation is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes and Equity Residential 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 Equity Residential 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 Equity Residential i.e., Equity Residential and Invitation Homes go up and down completely randomly.

Pair Corralation between Equity Residential and Invitation Homes

Considering the 90-day investment horizon Equity Residential is expected to under-perform the Invitation Homes. But the stock apears to be less risky and, when comparing its historical volatility, Equity Residential is 1.09 times less risky than Invitation Homes. The stock trades about -0.11 of its potential returns per unit of risk. The Invitation Homes is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,817  in Invitation Homes on March 31, 2022 and sell it today you would lose (282.00)  from holding Invitation Homes or give up 7.39% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Equity Residential  vs.  Invitation Homes

 Performance (%) 
      Timeline 
Equity Residential 
Equity Performance
0 of 100
Over the last 90 days Equity Residential has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0342
Payout Ratio
0.8
Last Split Factor
2:1
Forward Annual Dividend Rate
2.46
Dividend Date
2022-07-08
Ex Dividend Date
2022-06-24
Last Split Date
2001-10-12

Equity Price Channel

Invitation Homes 
Invitation Performance
0 of 100
Over the last 90 days Invitation Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0261
Payout Ratio
0.76
Forward Annual Dividend Rate
0.88
Dividend Date
2022-05-27
Ex Dividend Date
2022-05-09

Invitation Price Channel

Equity Residential and Invitation Homes Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Equity Residential and Invitation Homes

The main advantage of trading using opposite Equity Residential and Invitation Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Residential 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 Equity Residential 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.
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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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