Correlation Between Beazer Homes and Comstock Holding

Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Comstock Holding 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 Comstock Holding 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 Comstock Holding Companies, you can compare the effects of market volatilities on Beazer Homes and Comstock Holding 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 Comstock Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Comstock Holding.

Diversification Opportunities for Beazer Homes and Comstock Holding

-0.69

Correlation Coefficient

Beazer Homes  Comstock Holding

Excellent diversification

The 3 months correlation between Beazer and Comstock is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Comstock Holding Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comstock Holding Com 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 Comstock Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comstock Holding Com has no effect on the direction of Beazer Homes i.e., Beazer Homes and Comstock Holding go up and down completely randomly.

Pair Corralation between Beazer Homes and Comstock Holding

Considering the 90-day investment horizon Beazer Homes USA is expected to generate 0.36 times more return on investment than Comstock Holding. However, Beazer Homes USA is 2.76 times less risky than Comstock Holding. It trades about -0.05 of its potential returns per unit of risk. Comstock Holding Companies is currently generating about -0.07 per unit of risk. If you would invest  2,840  in Beazer Homes USA on February 28, 2024 and sell it today you would lose (87.00) from holding Beazer Homes USA or give up 3.06% of portfolio value over 90 days.

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

Beazer Homes USA  vs.  Comstock Holding Companies

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 latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Comstock Holding Com

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Comstock Holding Companies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, Comstock Holding demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Comstock Holding

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

The idea behind Beazer Homes USA and Comstock Holding Companies 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 Global Correlations module to find global opportunities by holding instruments from different markets.