Correlation Between Alphabet and Lennar
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and Lennar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and Lennar, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Lennar.
Diversification Opportunities for Alphabet and Lennar
Pay attention - limited upside
The 3 months correlation between Alphabet and Lennar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Lennar go up and down completely randomly.
Pair Corralation between Alphabet and Lennar
Given the investment horizon of 90 days Alphabet is expected to generate 1.92 times less return on investment than Lennar. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.0 times less risky than Lennar. It trades about 0.04 of its potential returns per unit of risk. Lennar is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 7,675 in Lennar on January 25, 2024 and sell it today you would earn a total of 7,895 from holding Lennar or generate 102.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Lennar
Performance |
| Timeline |
| Alphabet Class C |
| Lennar |
Alphabet and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Lennar
The main advantage of trading using opposite Alphabet and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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.The idea behind Alphabet Inc Class C and Lennar 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 the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |