Correlation Between Cavco Industries and Lennar
Can any of the company-specific risk be diversified away by investing in both Cavco Industries and Lennar 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 Cavco Industries and Lennar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cavco Industries and Lennar, you can compare the effects of market volatilities on Cavco Industries and Lennar 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 Cavco Industries with a short position of Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cavco Industries and Lennar.
Diversification Opportunities for Cavco Industries and Lennar
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cavco and Lennar is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Cavco Industries and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Cavco Industries 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 Cavco Industries are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Cavco Industries i.e., Cavco Industries and Lennar go up and down completely randomly.
Pair Corralation between Cavco Industries and Lennar
Given the investment horizon of 90 days Cavco Industries is expected to generate 1.25 times more return on investment than Lennar. However, Cavco Industries is 1.25 times more volatile than Lennar. It trades about 0.07 of its potential returns per unit of risk. Lennar is currently generating about 0.09 per unit of risk. If you would invest 26,965 in Cavco Industries on August 27, 2024 and sell it today you would earn a total of 24,326 from holding Cavco Industries or generate 90.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cavco Industries vs. Lennar
Performance |
| Timeline |
| Cavco Industries |
| Lennar |
Cavco Industries and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cavco Industries and Lennar
The main advantage of trading using opposite Cavco Industries and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cavco Industries position performs unexpectedly, Lennar 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 Lennar will offset losses from the drop in Lennar's long position.| Cavco Industries vs. Meritage | Cavco Industries vs. Installed Building Products | Cavco Industries vs. Taylor Morn Home | Cavco Industries vs. Legacy Housing Corp |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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