Correlation Between Barratt Developments and Beazer Homes
Can any of the company-specific risk be diversified away by investing in both Barratt Developments and Beazer Homes 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 Barratt Developments and Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barratt Developments plc and Beazer Homes USA, you can compare the effects of market volatilities on Barratt Developments and Beazer Homes 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 Barratt Developments with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barratt Developments and Beazer Homes.
Diversification Opportunities for Barratt Developments and Beazer Homes
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Barratt and Beazer is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Barratt Developments plc and Beazer Homes USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazer Homes USA and Barratt Developments 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 Barratt Developments plc are associated (or correlated) with Beazer Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazer Homes USA has no effect on the direction of Barratt Developments i.e., Barratt Developments and Beazer Homes go up and down completely randomly.
Pair Corralation between Barratt Developments and Beazer Homes
Assuming the 90 days horizon Barratt Developments plc is expected to under-perform the Beazer Homes. But the stock apears to be less risky and, when comparing its historical volatility, Barratt Developments plc is 2.46 times less risky than Beazer Homes. The stock trades about -0.37 of its potential returns per unit of risk. The Beazer Homes USA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,820 in Beazer Homes USA on August 24, 2024 and sell it today you would earn a total of 220.00 from holding Beazer Homes USA or generate 7.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Barratt Developments plc vs. Beazer Homes USA
Performance |
| Timeline |
| Barratt Developments plc |
| Beazer Homes USA |
Barratt Developments and Beazer Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barratt Developments and Beazer Homes
The main advantage of trading using opposite Barratt Developments and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barratt Developments position performs unexpectedly, Beazer Homes 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 Beazer Homes will offset losses from the drop in Beazer Homes' long position.| Barratt Developments vs. Check Point Software | Barratt Developments vs. WisdomTree Investments | Barratt Developments vs. REINET INVESTMENTS SCA | Barratt Developments vs. PSI Software AG |
| Beazer Homes vs. Lennar | Beazer Homes vs. NVR Inc | Beazer Homes vs. PulteGroup | Beazer Homes vs. Sekisui Chemical Co |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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