Correlation Between Cairn Homes and Beazer Homes
Can any of the company-specific risk be diversified away by investing in both Cairn Homes 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 Cairn Homes and Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cairn Homes PLC and Beazer Homes USA, you can compare the effects of market volatilities on Cairn Homes 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 Cairn Homes with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Beazer Homes.
Diversification Opportunities for Cairn Homes and Beazer Homes
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cairn and Beazer is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC 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 Cairn 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 Cairn Homes PLC 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 Cairn Homes i.e., Cairn Homes and Beazer Homes go up and down completely randomly.
Pair Corralation between Cairn Homes and Beazer Homes
Assuming the 90 days trading horizon Cairn Homes is expected to generate 2.0 times less return on investment than Beazer Homes. But when comparing it to its historical volatility, Cairn Homes PLC is 2.27 times less risky than Beazer Homes. It trades about 0.11 of its potential returns per unit of risk. Beazer Homes USA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,364 in Beazer Homes USA on August 27, 2024 and sell it today you would earn a total of 2,010 from holding Beazer Homes USA or generate 147.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 56.4% |
| Values | Daily Returns |
Cairn Homes PLC vs. Beazer Homes USA
Performance |
| Timeline |
| Cairn Homes PLC |
| Beazer Homes USA |
Cairn Homes and Beazer Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Beazer Homes
The main advantage of trading using opposite Cairn Homes and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes 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.| Cairn Homes vs. Tungsten West PLC | Cairn Homes vs. Argo Group Limited | Cairn Homes vs. Hardide PLC | Cairn Homes vs. Versarien PLC |
| Beazer Homes vs. Liberty Media Corp | Beazer Homes vs. XLMedia PLC | Beazer Homes vs. Fevertree Drinks Plc | Beazer Homes vs. LBG Media PLC |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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