Correlation Between Beazer Homes and Aeorema Communications
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Aeorema Communications 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 Aeorema Communications 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 Aeorema Communications Plc, you can compare the effects of market volatilities on Beazer Homes and Aeorema Communications 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 Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Aeorema Communications.
Diversification Opportunities for Beazer Homes and Aeorema Communications
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Beazer and Aeorema is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications 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 Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Beazer Homes i.e., Beazer Homes and Aeorema Communications go up and down completely randomly.
Pair Corralation between Beazer Homes and Aeorema Communications
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.01 times more return on investment than Aeorema Communications. However, Beazer Homes is 1.01 times more volatile than Aeorema Communications Plc. It trades about 0.12 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about -0.42 per unit of risk. If you would invest 2,724 in Beazer Homes USA on October 26, 2024 and sell it today you would earn a total of 91.00 from holding Beazer Homes USA or generate 3.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 73.68% |
| Values | Daily Returns |
Beazer Homes USA vs. Aeorema Communications Plc
Performance |
| Timeline |
| Beazer Homes USA |
| Aeorema Communications |
Beazer Homes and Aeorema Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and Aeorema Communications
The main advantage of trading using opposite Beazer Homes and Aeorema Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, Aeorema Communications 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 Aeorema Communications will offset losses from the drop in Aeorema Communications' long position.| Beazer Homes vs. Zegona Communications Plc | Beazer Homes vs. Fonix Mobile plc | Beazer Homes vs. Geely Automobile Holdings | Beazer Homes vs. Evolution Gaming Group |
| Aeorema Communications vs. American Homes 4 | Aeorema Communications vs. Beazer Homes USA | Aeorema Communications vs. Air Products Chemicals | Aeorema Communications vs. Bloomsbury Publishing 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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