Correlation Between Beazer Homes and United Utilities
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on Beazer Homes and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and United Utilities.
Diversification Opportunities for Beazer Homes and United Utilities
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Beazer and United is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Beazer Homes i.e., Beazer Homes and United Utilities go up and down completely randomly.
Pair Corralation between Beazer Homes and United Utilities
Assuming the 90 days trading horizon Beazer Homes is expected to generate 2.92 times less return on investment than United Utilities. In addition to that, Beazer Homes is 2.43 times more volatile than United Utilities Group. It trades about 0.01 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.05 per unit of volatility. If you would invest 103,746 in United Utilities Group on September 12, 2024 and sell it today you would earn a total of 4,054 from holding United Utilities Group or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 65.63% |
| Values | Daily Returns |
Beazer Homes USA vs. United Utilities Group
Performance |
| Timeline |
| Beazer Homes USA |
| United Utilities |
Beazer Homes and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and United Utilities
The main advantage of trading using opposite Beazer Homes and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' 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 |
| United Utilities vs. Toyota Motor Corp | United Utilities vs. SoftBank Group Corp | United Utilities vs. OTP Bank Nyrt | United Utilities vs. Hartford Financial Services |
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..
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |