Correlation Between INVITATION HOMES and Mid-America Apartment

Can any of the company-specific risk be diversified away by investing in both INVITATION HOMES and Mid-America Apartment 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 Mid-America Apartment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INVITATION HOMES DL and Mid America Apartment Communities, you can compare the effects of market volatilities on INVITATION HOMES and Mid-America Apartment 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 Mid-America Apartment. Check out your portfolio center. Please also check ongoing floating volatility patterns of INVITATION HOMES and Mid-America Apartment.

Diversification Opportunities for INVITATION HOMES and Mid-America Apartment

0.86

Correlation Coefficient

INVITATION HOMES  Mid-America Apartment

Very poor diversification

The 3 months correlation between INVITATION and Mid-America is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and Mid America Apartment Communit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid America Apartment 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 DL are associated (or correlated) with Mid-America Apartment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid America Apartment has no effect on the direction of INVITATION HOMES i.e., INVITATION HOMES and Mid-America Apartment go up and down completely randomly.

Pair Corralation between INVITATION HOMES and Mid-America Apartment

Assuming the 90 days horizon INVITATION HOMES DL is expected to generate 0.88 times more return on investment than Mid-America Apartment. However, INVITATION HOMES DL is 1.14 times less risky than Mid-America Apartment. It trades about -0.09 of its potential returns per unit of risk. Mid America Apartment Communities is currently generating about -0.1 per unit of risk. If you would invest  2,954  in INVITATION HOMES DL on April 23, 2025 and sell it today you would lose (194.00) from holding INVITATION HOMES DL or give up 6.57% of portfolio value over 90 days.

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

INVITATION HOMES DL  vs.  Mid America Apartment Communit

INVITATION HOMES

Risk-Adjusted Performance

Very Weak

Over the last 90 days INVITATION HOMES DL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Mid America Apartment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid America Apartment Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Pair Trading with INVITATION HOMES and Mid-America Apartment

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

The idea behind INVITATION HOMES DL and Mid America Apartment Communities 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.