Correlation Between Beazer Homes and China Communications
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and China Communications 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 China Communications 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 China Communications Services, you can compare the effects of market volatilities on Beazer Homes and China Communications 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 China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and China Communications.
Diversification Opportunities for Beazer Homes and China Communications
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Beazer and China is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Beazer Homes i.e., Beazer Homes and China Communications go up and down completely randomly.
Pair Corralation between Beazer Homes and China Communications
Assuming the 90 days trading horizon Beazer Homes USA is expected to under-perform the China Communications. In addition to that, Beazer Homes is 1.11 times more volatile than China Communications Services. It trades about -0.16 of its total potential returns per unit of risk. China Communications Services is currently generating about 0.34 per unit of volatility. If you would invest 53.00 in China Communications Services on November 28, 2024 and sell it today you would earn a total of 18.00 from holding China Communications Services or generate 33.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beazer Homes USA vs. China Communications Services
Performance |
| Timeline |
| Beazer Homes USA |
| China Communications |
Beazer Homes and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and China Communications
The main advantage of trading using opposite Beazer Homes and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.| Beazer Homes vs. DR Horton | Beazer Homes vs. LENNAR P B | Beazer Homes vs. Lennar | Beazer Homes vs. NVR Inc |
| China Communications vs. Playtech plc | China Communications vs. ASPEN TECHINC DL | China Communications vs. BioNTech SE | China Communications vs. FARO TECHNOLOGIES |
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 Directory module to find actively traded commodities issued by global exchanges.
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