Correlation Between Solstad Offshore and Beazer Homes
Can any of the company-specific risk be diversified away by investing in both Solstad Offshore 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 Solstad Offshore and Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solstad Offshore ASA and Beazer Homes USA, you can compare the effects of market volatilities on Solstad Offshore 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 Solstad Offshore with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solstad Offshore and Beazer Homes.
Diversification Opportunities for Solstad Offshore and Beazer Homes
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Solstad and Beazer is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA 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 Solstad Offshore 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 Solstad Offshore ASA 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 Solstad Offshore i.e., Solstad Offshore and Beazer Homes go up and down completely randomly.
Pair Corralation between Solstad Offshore and Beazer Homes
Assuming the 90 days trading horizon Solstad Offshore is expected to generate 1.0 times less return on investment than Beazer Homes. In addition to that, Solstad Offshore is 1.34 times more volatile than Beazer Homes USA. It trades about 0.25 of its total potential returns per unit of risk. Beazer Homes USA is currently generating about 0.33 per unit of volatility. If you would invest 3,034 in Beazer Homes USA on August 27, 2024 and sell it today you would earn a total of 563.00 from holding Beazer Homes USA or generate 18.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 72.22% |
| Values | Daily Returns |
Solstad Offshore ASA vs. Beazer Homes USA
Performance |
| Timeline |
| Solstad Offshore ASA |
| Beazer Homes USA |
Solstad Offshore and Beazer Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solstad Offshore and Beazer Homes
The main advantage of trading using opposite Solstad Offshore and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offshore 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.| Solstad Offshore vs. Samsung Electronics Co | Solstad Offshore vs. Samsung Electronics Co | Solstad Offshore vs. Hyundai Motor | Solstad Offshore vs. Toyota Motor Corp |
| Beazer Homes vs. Liberty Media Corp | Beazer Homes vs. XLMedia PLC | Beazer Homes vs. Fevertree Drinks Plc | Beazer Homes vs. LBG Media PLC |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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