Correlation Between Beazer Homes and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Cairn 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 Beazer Homes and Cairn Homes 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 Cairn Homes PLC, you can compare the effects of market volatilities on Beazer Homes and Cairn 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 Beazer Homes with a short position of Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Cairn Homes.
Diversification Opportunities for Beazer Homes and Cairn Homes
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Beazer and Cairn is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC 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 Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of Beazer Homes i.e., Beazer Homes and Cairn Homes go up and down completely randomly.
Pair Corralation between Beazer Homes and Cairn Homes
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.21 times more return on investment than Cairn Homes. However, Beazer Homes is 1.21 times more volatile than Cairn Homes PLC. It trades about 0.0 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about -0.32 per unit of risk. If you would invest 2,827 in Beazer Homes USA on October 21, 2024 and sell it today you would lose (4.00) from holding Beazer Homes USA or give up 0.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 73.68% |
| Values | Daily Returns |
Beazer Homes USA vs. Cairn Homes PLC
Performance |
| Timeline |
| Beazer Homes USA |
| Cairn Homes PLC |
Beazer Homes and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and Cairn Homes
The main advantage of trading using opposite Beazer Homes and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, Cairn 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 Cairn Homes will offset losses from the drop in Cairn Homes' long position.| Beazer Homes vs. Smithson Investment Trust | Beazer Homes vs. PPHE Hotel Group | Beazer Homes vs. Melia Hotels | Beazer Homes vs. EJF Investments |
| Cairn Homes vs. Ecofin Global Utilities | Cairn Homes vs. BE Semiconductor Industries | Cairn Homes vs. Leroy Seafood Group | Cairn Homes vs. Aeorema Communications 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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