Correlation Between Beazer Homes and FC Investment
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and FC Investment 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 FC Investment 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 FC Investment Trust, you can compare the effects of market volatilities on Beazer Homes and FC Investment 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 FC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and FC Investment.
Diversification Opportunities for Beazer Homes and FC Investment
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Beazer and FCIT is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and FC Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FC Investment Trust 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 FC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FC Investment Trust has no effect on the direction of Beazer Homes i.e., Beazer Homes and FC Investment go up and down completely randomly.
Pair Corralation between Beazer Homes and FC Investment
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 5.15 times more return on investment than FC Investment. However, Beazer Homes is 5.15 times more volatile than FC Investment Trust. It trades about 0.33 of its potential returns per unit of risk. FC Investment Trust is currently generating about 0.35 per unit of risk. 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 Together |
| Strength | Weak |
| Accuracy | 61.9% |
| Values | Daily Returns |
Beazer Homes USA vs. FC Investment Trust
Performance |
| Timeline |
| Beazer Homes USA |
| FC Investment Trust |
Beazer Homes and FC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and FC Investment
The main advantage of trading using opposite Beazer Homes and FC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, FC Investment 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 FC Investment will offset losses from the drop in FC Investment's long position.| Beazer Homes vs. Liberty Media Corp | Beazer Homes vs. XLMedia PLC | Beazer Homes vs. Fevertree Drinks Plc | Beazer Homes vs. LBG Media PLC |
| FC Investment vs. Intermediate Capital Group | FC Investment vs. Centaur Media | FC Investment vs. Atresmedia | FC Investment vs. Gaztransport et Technigaz |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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