Correlation Between Beazer Homes and Check Point
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Check Point 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 Check Point 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 Check Point Software, you can compare the effects of market volatilities on Beazer Homes and Check Point 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 Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Check Point.
Diversification Opportunities for Beazer Homes and Check Point
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Beazer and Check is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Beazer Homes i.e., Beazer Homes and Check Point go up and down completely randomly.
Pair Corralation between Beazer Homes and Check Point
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 2.95 times more return on investment than Check Point. However, Beazer Homes is 2.95 times more volatile than Check Point Software. It trades about 0.08 of its potential returns per unit of risk. Check Point Software is currently generating about 0.07 per unit of risk. If you would invest 1,622 in Beazer Homes USA on September 19, 2024 and sell it today you would earn a total of 1,544 from holding Beazer Homes USA or generate 95.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 61.17% |
| Values | Daily Returns |
Beazer Homes USA vs. Check Point Software
Performance |
| Timeline |
| Beazer Homes USA |
| Check Point Software |
Beazer Homes and Check Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and Check Point
The main advantage of trading using opposite Beazer Homes and Check Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, Check Point 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 Check Point will offset losses from the drop in Check Point's long position.| Beazer Homes vs. Eastman Chemical Co | Beazer Homes vs. Spirent Communications plc | Beazer Homes vs. Liontrust Asset Management | Beazer Homes vs. Charter Communications Cl |
| Check Point vs. Toyota Motor Corp | Check Point vs. SoftBank Group Corp | Check Point vs. OTP Bank Nyrt | Check Point vs. Hershey Co |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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