Correlation Between Beazer Homes and Fastenal
Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Fastenal 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 Fastenal 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 Fastenal Company, you can compare the effects of market volatilities on Beazer Homes and Fastenal 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 Fastenal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Fastenal.
Diversification Opportunities for Beazer Homes and Fastenal
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Beazer and Fastenal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Beazer Homes i.e., Beazer Homes and Fastenal go up and down completely randomly.
Pair Corralation between Beazer Homes and Fastenal
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 2.23 times more return on investment than Fastenal. However, Beazer Homes is 2.23 times more volatile than Fastenal Company. It trades about 0.06 of its potential returns per unit of risk. Fastenal Company is currently generating about 0.07 per unit of risk. If you would invest 1,390 in Beazer Homes USA on November 4, 2024 and sell it today you would earn a total of 1,270 from holding Beazer Homes USA or generate 91.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beazer Homes USA vs. Fastenal Company
Performance |
| Timeline |
| Beazer Homes USA |
| Fastenal |
Beazer Homes and Fastenal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and Fastenal
The main advantage of trading using opposite Beazer Homes and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, Fastenal 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 Fastenal will offset losses from the drop in Fastenal's long position.| Beazer Homes vs. Discover Financial Services | Beazer Homes vs. Erste Group Bank | Beazer Homes vs. Commonwealth Bank of | Beazer Homes vs. TOWNSQUARE MEDIA INC |
| Fastenal vs. Hitachi Construction Machinery | Fastenal vs. AOI Electronics Co | Fastenal vs. China Railway Construction | Fastenal vs. STMicroelectronics NV |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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