Correlation Between Beazer Homes and Virgin Wines
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Virgin Wines 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 Virgin Wines 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 Virgin Wines UK, you can compare the effects of market volatilities on Beazer Homes and Virgin Wines 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 Virgin Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Virgin Wines.
Diversification Opportunities for Beazer Homes and Virgin Wines
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Beazer and Virgin is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK 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 Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of Beazer Homes i.e., Beazer Homes and Virgin Wines go up and down completely randomly.
Pair Corralation between Beazer Homes and Virgin Wines
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.73 times more return on investment than Virgin Wines. However, Beazer Homes is 1.73 times more volatile than Virgin Wines UK. It trades about 0.07 of its potential returns per unit of risk. Virgin Wines UK is currently generating about -0.03 per unit of risk. If you would invest 1,517 in Beazer Homes USA on October 11, 2024 and sell it today you would earn a total of 1,108 from holding Beazer Homes USA or generate 73.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 59.15% |
| Values | Daily Returns |
Beazer Homes USA vs. Virgin Wines UK
Performance |
| Timeline |
| Beazer Homes USA |
| Virgin Wines UK |
Beazer Homes and Virgin Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and Virgin Wines
The main advantage of trading using opposite Beazer Homes and Virgin Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, Virgin Wines 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 Virgin Wines will offset losses from the drop in Virgin Wines' long position.| Beazer Homes vs. AcadeMedia AB | Beazer Homes vs. MediaZest plc | Beazer Homes vs. Liberty Media Corp | Beazer Homes vs. UNIQA Insurance Group |
| Virgin Wines vs. Live Nation Entertainment | Virgin Wines vs. Arrow Electronics | Virgin Wines vs. LBG Media PLC | Virgin Wines vs. JD Sports Fashion |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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