Correlation Between Beazer Homes and International Biotechnology
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and International Biotechnology 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 International Biotechnology 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 International Biotechnology Trust, you can compare the effects of market volatilities on Beazer Homes and International Biotechnology 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 International Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and International Biotechnology.
Diversification Opportunities for Beazer Homes and International Biotechnology
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Beazer and International is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and International Biotechnology Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Biotechnology 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 International Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Biotechnology has no effect on the direction of Beazer Homes i.e., Beazer Homes and International Biotechnology go up and down completely randomly.
Pair Corralation between Beazer Homes and International Biotechnology
Assuming the 90 days trading horizon Beazer Homes is expected to generate 3.54 times less return on investment than International Biotechnology. In addition to that, Beazer Homes is 2.58 times more volatile than International Biotechnology Trust. It trades about 0.01 of its total potential returns per unit of risk. International Biotechnology Trust is currently generating about 0.07 per unit of volatility. If you would invest 67,800 in International Biotechnology Trust on September 12, 2024 and sell it today you would earn a total of 3,400 from holding International Biotechnology Trust or generate 5.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 64.62% |
| Values | Daily Returns |
Beazer Homes USA vs. International Biotechnology Tr
Performance |
| Timeline |
| Beazer Homes USA |
| International Biotechnology |
Beazer Homes and International Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and International Biotechnology
The main advantage of trading using opposite Beazer Homes and International Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, International Biotechnology 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 International Biotechnology will offset losses from the drop in International Biotechnology's long position.| Beazer Homes vs. Samsung Electronics Co | Beazer Homes vs. Samsung Electronics Co | Beazer Homes vs. Hyundai Motor | Beazer Homes vs. Reliance Industries Ltd |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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