Correlation Between Century Communities and Legacy Housing
Can any of the company-specific risk be diversified away by investing in both Century Communities and Legacy Housing 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 Century Communities and Legacy Housing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Communities and Legacy Housing Corp, you can compare the effects of market volatilities on Century Communities and Legacy Housing 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 Century Communities with a short position of Legacy Housing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Communities and Legacy Housing.
Diversification Opportunities for Century Communities and Legacy Housing
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Century and Legacy is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Century Communities and Legacy Housing Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Housing Corp and Century Communities 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 Century Communities are associated (or correlated) with Legacy Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Housing Corp has no effect on the direction of Century Communities i.e., Century Communities and Legacy Housing go up and down completely randomly.
Pair Corralation between Century Communities and Legacy Housing
Considering the 90-day investment horizon Century Communities is expected to generate 1.04 times less return on investment than Legacy Housing. In addition to that, Century Communities is 1.07 times more volatile than Legacy Housing Corp. It trades about 0.08 of its total potential returns per unit of risk. Legacy Housing Corp is currently generating about 0.09 per unit of volatility. If you would invest 2,557 in Legacy Housing Corp on August 28, 2024 and sell it today you would earn a total of 97.00 from holding Legacy Housing Corp or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Communities vs. Legacy Housing Corp
Performance |
| Timeline |
| Century Communities |
| Legacy Housing Corp |
Century Communities and Legacy Housing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Communities and Legacy Housing
The main advantage of trading using opposite Century Communities and Legacy Housing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Communities position performs unexpectedly, Legacy Housing 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 Legacy Housing will offset losses from the drop in Legacy Housing's long position.| Century Communities vs. Taylor Morn Home | Century Communities vs. Beazer Homes USA | Century Communities vs. Meritage | Century Communities vs. TRI Pointe Homes |
| Legacy Housing vs. MI Homes | Legacy Housing vs. Taylor Morn Home | Legacy Housing vs. TRI Pointe Homes | Legacy Housing vs. Beazer Homes USA |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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