Correlation Between Beazer Homes and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Cognizant Technology 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 Cognizant Technology 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 Cognizant Technology Solutions, you can compare the effects of market volatilities on Beazer Homes and Cognizant Technology 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 Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Cognizant Technology.
Diversification Opportunities for Beazer Homes and Cognizant Technology
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Beazer and Cognizant is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology 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 Cognizant Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognizant Technology has no effect on the direction of Beazer Homes i.e., Beazer Homes and Cognizant Technology go up and down completely randomly.
Pair Corralation between Beazer Homes and Cognizant Technology
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 2.72 times more return on investment than Cognizant Technology. However, Beazer Homes is 2.72 times more volatile than Cognizant Technology Solutions. It trades about 0.1 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.05 per unit of risk. If you would invest 1,364 in Beazer Homes USA on September 3, 2024 and sell it today you would earn a total of 2,141 from holding Beazer Homes USA or generate 156.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 57.89% |
| Values | Daily Returns |
Beazer Homes USA vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Beazer Homes USA |
| Cognizant Technology |
Beazer Homes and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and Cognizant Technology
The main advantage of trading using opposite Beazer Homes and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, Cognizant Technology 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 Cognizant Technology will offset losses from the drop in Cognizant Technology's long position.| Beazer Homes vs. Herald Investment Trust | Beazer Homes vs. New Residential Investment | Beazer Homes vs. Hansa Investment | Beazer Homes vs. Veolia Environnement VE |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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