Correlation Between Fossil and Lennar
Can any of the company-specific risk be diversified away by investing in both Fossil 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 Fossil and Lennar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fossil Group and Lennar, you can compare the effects of market volatilities on Fossil 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 Fossil with a short position of Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fossil and Lennar.
Diversification Opportunities for Fossil and Lennar
Very good diversification
The 3 months correlation between Fossil and Lennar is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fossil Group and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Fossil 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 Fossil Group 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 Fossil i.e., Fossil and Lennar go up and down completely randomly.
Pair Corralation between Fossil and Lennar
Given the investment horizon of 90 days Fossil Group is expected to generate 2.5 times more return on investment than Lennar. However, Fossil is 2.5 times more volatile than Lennar. It trades about 0.16 of its potential returns per unit of risk. Lennar is currently generating about 0.04 per unit of risk. If you would invest 127.00 in Fossil Group on August 31, 2024 and sell it today you would earn a total of 22.00 from holding Fossil Group or generate 17.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fossil Group vs. Lennar
Performance |
| Timeline |
| Fossil Group |
| Lennar |
Fossil and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fossil and Lennar
The main advantage of trading using opposite Fossil and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fossil 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.| Fossil vs. Lanvin Group Holdings | Fossil vs. Signet Jewelers | Fossil vs. Tapestry | Fossil vs. Capri Holdings |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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