Correlation Between Beazer Homes and Compania

Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Compania 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 Beazer Homes and Compania into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beazer Homes USA and Compania de Minas, you can compare the effects of market volatilities on Beazer Homes and Compania 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 Beazer Homes with a short position of Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Compania.

Diversification Opportunities for Beazer Homes and Compania

-0.1

Correlation Coefficient

Beazer Homes  Compania

Good diversification

The 3 months correlation between Beazer and Compania is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Compania de Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Minas and Beazer Homes 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 Beazer Homes USA are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Minas has no effect on the direction of Beazer Homes i.e., Beazer Homes and Compania go up and down completely randomly.

Pair Corralation between Beazer Homes and Compania

Considering the 90-day investment horizon Beazer Homes USA is expected to under-perform the Compania. In addition to that, Beazer Homes is 1.0 times more volatile than Compania de Minas. It trades about -0.38 of its total potential returns per unit of risk. Compania de Minas is currently generating about -0.16 per unit of volatility. If you would invest  1,724  in Compania de Minas on January 20, 2024 and sell it today you would lose (132.00) from holding Compania de Minas or give up 7.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Beazer Homes USA  vs.  Compania de Minas

Beazer Homes USA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Compania de Minas

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Compania may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Beazer Homes and Compania

The main advantage of trading using opposite Beazer Homes and Compania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, Compania 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 Compania will offset losses from the drop in Compania's long position.

The idea behind Beazer Homes USA and Compania de Minas 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.