Correlation Between Century Communities and Meritage
Can any of the company-specific risk be diversified away by investing in both Century Communities and Meritage 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 Meritage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Communities and Meritage, you can compare the effects of market volatilities on Century Communities and Meritage 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 Meritage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Communities and Meritage.
Diversification Opportunities for Century Communities and Meritage
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Century and Meritage is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Century Communities and Meritage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meritage 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 Meritage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meritage has no effect on the direction of Century Communities i.e., Century Communities and Meritage go up and down completely randomly.
Pair Corralation between Century Communities and Meritage
Considering the 90-day investment horizon Century Communities is expected to under-perform the Meritage. In addition to that, Century Communities is 1.09 times more volatile than Meritage. It trades about -0.1 of its total potential returns per unit of risk. Meritage is currently generating about -0.07 per unit of volatility. If you would invest 18,332 in Meritage on August 24, 2024 and sell it today you would lose (564.00) from holding Meritage or give up 3.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Communities vs. Meritage
Performance |
| Timeline |
| Century Communities |
| Meritage |
Century Communities and Meritage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Communities and Meritage
The main advantage of trading using opposite Century Communities and Meritage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Communities position performs unexpectedly, Meritage 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 Meritage will offset losses from the drop in Meritage'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 |
| Meritage vs. TRI Pointe Homes | Meritage vs. MI Homes | Meritage vs. Beazer Homes USA | Meritage vs. Century Communities |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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