Correlation Between Intuit and Lennar
Can any of the company-specific risk be diversified away by investing in both Intuit 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 Intuit and Lennar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intuit Inc and Lennar, you can compare the effects of market volatilities on Intuit 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 Intuit with a short position of Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intuit and Lennar.
Diversification Opportunities for Intuit and Lennar
Modest diversification
The 3 months correlation between Intuit and Lennar is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Intuit Inc and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Intuit 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 Intuit Inc 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 Intuit i.e., Intuit and Lennar go up and down completely randomly.
Pair Corralation between Intuit and Lennar
Given the investment horizon of 90 days Intuit Inc is expected to generate 0.59 times more return on investment than Lennar. However, Intuit Inc is 1.69 times less risky than Lennar. It trades about -0.12 of its potential returns per unit of risk. Lennar is currently generating about -0.1 per unit of risk. If you would invest 63,367 in Intuit Inc on January 19, 2024 and sell it today you would lose (2,046) from holding Intuit Inc or give up 3.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intuit Inc vs. Lennar
Performance |
| Timeline |
| Intuit Inc |
| Lennar |
Intuit and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intuit and Lennar
The main advantage of trading using opposite Intuit and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intuit 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 Intuit Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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