Correlation Between Beazer Homes and London Security
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and London Security 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 London Security 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 London Security Plc, you can compare the effects of market volatilities on Beazer Homes and London Security 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 London Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and London Security.
Diversification Opportunities for Beazer Homes and London Security
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Beazer and London is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security 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 London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of Beazer Homes i.e., Beazer Homes and London Security go up and down completely randomly.
Pair Corralation between Beazer Homes and London Security
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 3.73 times more return on investment than London Security. However, Beazer Homes is 3.73 times more volatile than London Security Plc. It trades about 0.02 of its potential returns per unit of risk. London Security Plc is currently generating about 0.06 per unit of risk. If you would invest 3,083 in Beazer Homes USA on September 12, 2024 and sell it today you would earn a total of 83.00 from holding Beazer Homes USA or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 58.63% |
| Values | Daily Returns |
Beazer Homes USA vs. London Security Plc
Performance |
| Timeline |
| Beazer Homes USA |
| London Security Plc |
Beazer Homes and London Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and London Security
The main advantage of trading using opposite Beazer Homes and London Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, London Security 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 London Security will offset losses from the drop in London Security's long position.| Beazer Homes vs. Hong Kong Land | Beazer Homes vs. Neometals | Beazer Homes vs. Coor Service Management | Beazer Homes vs. Fidelity Sustainable USD |
| London Security vs. McEwen Mining | London Security vs. Arrow Electronics | London Security vs. Pets at Home | London Security vs. Beazer Homes USA |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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