Correlation Between Peabody Energy and Lennar
Can any of the company-specific risk be diversified away by investing in both Peabody Energy and Lennar 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 Peabody Energy and Lennar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Peabody Energy Corp and Lennar, you can compare the effects of market volatilities on Peabody Energy and Lennar 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 Peabody Energy with a short position of Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peabody Energy and Lennar.
Diversification Opportunities for Peabody Energy and Lennar
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Peabody and Lennar is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Peabody Energy Corp and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Peabody Energy 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 Peabody Energy Corp are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Peabody Energy i.e., Peabody Energy and Lennar go up and down completely randomly.
Pair Corralation between Peabody Energy and Lennar
Considering the 90-day investment horizon Peabody Energy Corp is expected to under-perform the Lennar. But the stock apears to be less risky and, when comparing its historical volatility, Peabody Energy Corp is 1.14 times less risky than Lennar. The stock trades about -0.13 of its potential returns per unit of risk. The Lennar is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 13,552 in Lennar on January 26, 2024 and sell it today you would earn a total of 617.00 from holding Lennar or generate 4.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Peabody Energy Corp vs. Lennar
Performance |
Timeline |
Peabody Energy Corp |
Lennar |
Peabody Energy and Lennar Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Peabody Energy and Lennar
The main advantage of trading using opposite Peabody Energy and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peabody Energy position performs unexpectedly, Lennar 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 Lennar will offset losses from the drop in Lennar's long position.Peabody Energy vs. Alliance Resource Partners | Peabody Energy vs. Hallador Energy | Peabody Energy vs. Consol Energy | Peabody Energy vs. Indo Tambangraya Megah |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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