Correlation Between Gamma Communications and Beazer Homes
Can any of the company-specific risk be diversified away by investing in both Gamma Communications 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 Gamma Communications and Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications plc and Beazer Homes USA, you can compare the effects of market volatilities on Gamma Communications 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 Gamma Communications with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Beazer Homes.
Diversification Opportunities for Gamma Communications and Beazer Homes
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gamma and Beazer is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications 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 Gamma Communications 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 Gamma Communications 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 Gamma Communications i.e., Gamma Communications and Beazer Homes go up and down completely randomly.
Pair Corralation between Gamma Communications and Beazer Homes
Assuming the 90 days horizon Gamma Communications plc is expected to generate 0.37 times more return on investment than Beazer Homes. However, Gamma Communications plc is 2.73 times less risky than Beazer Homes. It trades about 0.04 of its potential returns per unit of risk. Beazer Homes USA is currently generating about -0.16 per unit of risk. If you would invest 1,540 in Gamma Communications plc on November 28, 2024 and sell it today you would earn a total of 20.00 from holding Gamma Communications plc or generate 1.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications plc vs. Beazer Homes USA
Performance |
| Timeline |
| Gamma Communications plc |
| Beazer Homes USA |
Gamma Communications and Beazer Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and Beazer Homes
The main advantage of trading using opposite Gamma Communications and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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.| Gamma Communications vs. Phibro Animal Health | Gamma Communications vs. RCI Hospitality Holdings | Gamma Communications vs. MHP Hotel AG | Gamma Communications vs. COMM HEALTH SYSTEMS |
| Beazer Homes vs. DR Horton | Beazer Homes vs. LENNAR P B | Beazer Homes vs. Lennar | Beazer Homes vs. NVR Inc |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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