Correlation Between PulteGroup and Beazer Homes
Can any of the company-specific risk be diversified away by investing in both PulteGroup and Beazer Homes 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 PulteGroup and Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PulteGroup and Beazer Homes USA, you can compare the effects of market volatilities on PulteGroup and Beazer Homes 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 PulteGroup with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of PulteGroup and Beazer Homes.
Diversification Opportunities for PulteGroup and Beazer Homes
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PulteGroup and Beazer is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding PulteGroup and Beazer Homes USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazer Homes USA and PulteGroup 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 PulteGroup are associated (or correlated) with Beazer Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazer Homes USA has no effect on the direction of PulteGroup i.e., PulteGroup and Beazer Homes go up and down completely randomly.
Pair Corralation between PulteGroup and Beazer Homes
Considering the 90-day investment horizon PulteGroup is expected to generate 0.56 times more return on investment than Beazer Homes. However, PulteGroup is 1.8 times less risky than Beazer Homes. It trades about 0.12 of its potential returns per unit of risk. Beazer Homes USA is currently generating about 0.05 per unit of risk. If you would invest 6,524 in PulteGroup on January 19, 2024 and sell it today you would earn a total of 4,091 from holding PulteGroup or generate 62.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PulteGroup vs. Beazer Homes USA
Performance |
| Timeline |
| PulteGroup |
| Beazer Homes USA |
PulteGroup and Beazer Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PulteGroup and Beazer Homes
The main advantage of trading using opposite PulteGroup and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PulteGroup position performs unexpectedly, Beazer Homes 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 Beazer Homes will offset losses from the drop in Beazer Homes' long position.The idea behind PulteGroup and Beazer Homes USA 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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