I read in a book on causal inference on networks that:
The unconfoundedness assumption does not rule out the presence of homophily, that is tendency of individuals who share similar characteristics to form ties. Homophily does not violate the unconfoudedness assumption in the cases where characteristics driving the homophily mechanism i) are included in the covariate set , ii) even if unobserved they do not affect the outcomes iii) they correspond to treament, that is, people who share the same treatment/exposure variable tend to form ties. The only situation where homophily is a threat to identification is when variables underlying the network formation process are not included in the covarite set and affect the outcome.
I am wondering if someone can give me more explanation on why we might even have reason to believe unconfoundedness can violate homophily. They seem to be two different things. What is it about the unconfoundedness assumption:
$$ Y(1),Y(0) \perp Z \mid X $$
that might even be related to homophily?