Correlation Between Hovnanian Enterprises and Meritage
Can any of the company-specific risk be diversified away by investing in both Hovnanian Enterprises 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 Hovnanian Enterprises and Meritage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hovnanian Enterprises and Meritage, you can compare the effects of market volatilities on Hovnanian Enterprises 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 Hovnanian Enterprises with a short position of Meritage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hovnanian Enterprises and Meritage.
Diversification Opportunities for Hovnanian Enterprises and Meritage
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hovnanian and Meritage is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hovnanian Enterprises and Meritage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meritage and Hovnanian Enterprises 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 Hovnanian Enterprises 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 Hovnanian Enterprises i.e., Hovnanian Enterprises and Meritage go up and down completely randomly.
Pair Corralation between Hovnanian Enterprises and Meritage
Considering the 90-day investment horizon Hovnanian Enterprises is expected to generate 1.66 times more return on investment than Meritage. However, Hovnanian Enterprises is 1.66 times more volatile than Meritage. It trades about 0.04 of its potential returns per unit of risk. Meritage is currently generating about 0.05 per unit of risk. If you would invest 15,666 in Hovnanian Enterprises on August 27, 2024 and sell it today you would earn a total of 2,508 from holding Hovnanian Enterprises or generate 16.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hovnanian Enterprises vs. Meritage
Performance |
| Timeline |
| Hovnanian Enterprises |
| Meritage |
Hovnanian Enterprises and Meritage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hovnanian Enterprises and Meritage
The main advantage of trading using opposite Hovnanian Enterprises and Meritage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hovnanian Enterprises 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.| Hovnanian Enterprises vs. Taylor Morn Home | Hovnanian Enterprises vs. KB Home | Hovnanian Enterprises vs. MI Homes | Hovnanian Enterprises vs. Century Communities |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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