Correlation Between Better Home and PACCAR
Can any of the company-specific risk be diversified away by investing in both Better Home and PACCAR 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 Better Home and PACCAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Better Home Finance and PACCAR Inc, you can compare the effects of market volatilities on Better Home and PACCAR 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 Better Home with a short position of PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Better Home and PACCAR.
Diversification Opportunities for Better Home and PACCAR
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Better and PACCAR is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Better Home Finance and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and Better Home 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 Better Home Finance are associated (or correlated) with PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Better Home i.e., Better Home and PACCAR go up and down completely randomly.
Pair Corralation between Better Home and PACCAR
Assuming the 90 days horizon Better Home is expected to generate 2.97 times less return on investment than PACCAR. In addition to that, Better Home is 8.59 times more volatile than PACCAR Inc. It trades about 0.01 of its total potential returns per unit of risk. PACCAR Inc is currently generating about 0.24 per unit of volatility. If you would invest 10,455 in PACCAR Inc on September 4, 2024 and sell it today you would earn a total of 1,169 from holding PACCAR Inc or generate 11.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 52.38% |
| Values | Daily Returns |
Better Home Finance vs. PACCAR Inc
Performance |
| Timeline |
| Better Home Finance |
| PACCAR Inc |
Better Home and PACCAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Better Home and PACCAR
The main advantage of trading using opposite Better Home and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Better Home position performs unexpectedly, PACCAR 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 PACCAR will offset losses from the drop in PACCAR's long position.| Better Home vs. PACCAR Inc | Better Home vs. Visteon Corp | Better Home vs. Rivian Automotive | Better Home vs. Patterson UTI Energy |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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