Correlation Between Beazer Homes and American Homes
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and American 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 Beazer Homes and American Homes 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 American Homes 4, you can compare the effects of market volatilities on Beazer Homes and American 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 Beazer Homes with a short position of American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and American Homes.
Diversification Opportunities for Beazer Homes and American Homes
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Beazer and American is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Beazer Homes i.e., Beazer Homes and American Homes go up and down completely randomly.
Pair Corralation between Beazer Homes and American Homes
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.89 times more return on investment than American Homes. However, Beazer Homes is 1.89 times more volatile than American Homes 4. It trades about 0.05 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.03 per unit of risk. If you would invest 1,390 in Beazer Homes USA on November 19, 2024 and sell it today you would earn a total of 950.00 from holding Beazer Homes USA or generate 68.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beazer Homes USA vs. American Homes 4
Performance |
| Timeline |
| Beazer Homes USA |
| American Homes 4 |
Beazer Homes and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and American Homes
The main advantage of trading using opposite Beazer Homes and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, American 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 American Homes will offset losses from the drop in American Homes' long position.| Beazer Homes vs. REMEDY ENTERTAINMENT OYJ | Beazer Homes vs. 24SEVENOFFICE GROUP AB | Beazer Homes vs. Live Nation Entertainment | Beazer Homes vs. CENTURIA OFFICE REIT |
| American Homes vs. STORE ELECTRONIC | American Homes vs. Japan Tobacco | American Homes vs. Renesas Electronics | American Homes vs. Arrow Electronics |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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