Correlation Between Big 5 and Beazer Homes
Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Beazer Homes USA, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Beazer Homes.
Diversification Opportunities for Big 5 and Beazer Homes
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Big and Beazer is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting 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 Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and Beazer Homes go up and down completely randomly.
Pair Corralation between Big 5 and Beazer Homes
Assuming the 90 days horizon Big 5 is expected to generate 2.73 times less return on investment than Beazer Homes. But when comparing it to its historical volatility, Big 5 Sporting is 1.35 times less risky than Beazer Homes. It trades about 0.08 of its potential returns per unit of risk. Beazer Homes USA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,840 in Beazer Homes USA on August 31, 2024 and sell it today you would earn a total of 440.00 from holding Beazer Homes USA or generate 15.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. Beazer Homes USA
Performance |
| Timeline |
| Big 5 Sporting |
| Beazer Homes USA |
Big 5 and Beazer Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Beazer Homes
The main advantage of trading using opposite Big 5 and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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.The idea behind Big 5 Sporting and Beazer Homes USA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Beazer Homes vs. Big 5 Sporting | Beazer Homes vs. SALESFORCE INC CDR | Beazer Homes vs. RETAIL FOOD GROUP | Beazer Homes vs. SCIENCE IN SPORT |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |