Correlation Between Beazer Homes and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Naked 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 Naked 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 Naked Wines plc, you can compare the effects of market volatilities on Beazer Homes and Naked 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 Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Naked Wines.
Diversification Opportunities for Beazer Homes and Naked Wines
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Beazer and Naked is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Beazer Homes i.e., Beazer Homes and Naked Wines go up and down completely randomly.
Pair Corralation between Beazer Homes and Naked Wines
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.1 times more return on investment than Naked Wines. However, Beazer Homes is 1.1 times more volatile than Naked Wines plc. It trades about 0.1 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.02 per unit of risk. If you would invest 1,280 in Beazer Homes USA on September 12, 2024 and sell it today you would earn a total of 1,976 from holding Beazer Homes USA or generate 154.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 58.35% |
| Values | Daily Returns |
Beazer Homes USA vs. Naked Wines plc
Performance |
| Timeline |
| Beazer Homes USA |
| Naked Wines plc |
Beazer Homes and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and Naked Wines
The main advantage of trading using opposite Beazer Homes and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, Naked 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 Naked Wines will offset losses from the drop in Naked Wines' long position.| Beazer Homes vs. Hong Kong Land | Beazer Homes vs. Neometals | Beazer Homes vs. Coor Service Management | Beazer Homes vs. Fidelity Sustainable USD |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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