Correlation Between Lennar and TSINGTAO H
Can any of the company-specific risk be diversified away by investing in both Lennar and TSINGTAO H 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 Lennar and TSINGTAO H into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennar and TSINGTAO H , you can compare the effects of market volatilities on Lennar and TSINGTAO H 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 Lennar with a short position of TSINGTAO H. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennar and TSINGTAO H.
Diversification Opportunities for Lennar and TSINGTAO H
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lennar and TSINGTAO is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and TSINGTAO H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TSINGTAO H and Lennar 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 Lennar are associated (or correlated) with TSINGTAO H. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TSINGTAO H has no effect on the direction of Lennar i.e., Lennar and TSINGTAO H go up and down completely randomly.
Pair Corralation between Lennar and TSINGTAO H
Considering the 90-day investment horizon Lennar is expected to generate 3.28 times less return on investment than TSINGTAO H. In addition to that, Lennar is 1.0 times more volatile than TSINGTAO H . It trades about 0.02 of its total potential returns per unit of risk. TSINGTAO H is currently generating about 0.05 per unit of volatility. If you would invest 637.00 in TSINGTAO H on January 27, 2024 and sell it today you would earn a total of 23.00 from holding TSINGTAO H or generate 3.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lennar vs. TSINGTAO H
Performance |
| Timeline |
| Lennar |
| TSINGTAO H |
Lennar and TSINGTAO H Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennar and TSINGTAO H
The main advantage of trading using opposite Lennar and TSINGTAO H positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennar position performs unexpectedly, TSINGTAO H 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 TSINGTAO H will offset losses from the drop in TSINGTAO H's long position.The idea behind Lennar and TSINGTAO H 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.
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