Correlation Between Hovnanian Enterprises and Universal Electronics
Can any of the company-specific risk be diversified away by investing in both Hovnanian Enterprises and Universal Electronics 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 Universal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hovnanian Enterprises and Universal Electronics, you can compare the effects of market volatilities on Hovnanian Enterprises and Universal Electronics 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 Universal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hovnanian Enterprises and Universal Electronics.
Diversification Opportunities for Hovnanian Enterprises and Universal Electronics
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hovnanian and Universal is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hovnanian Enterprises and Universal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Electronics 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 Universal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Electronics has no effect on the direction of Hovnanian Enterprises i.e., Hovnanian Enterprises and Universal Electronics go up and down completely randomly.
Pair Corralation between Hovnanian Enterprises and Universal Electronics
Considering the 90-day investment horizon Hovnanian Enterprises is expected to generate 5.1 times less return on investment than Universal Electronics. But when comparing it to its historical volatility, Hovnanian Enterprises is 2.55 times less risky than Universal Electronics. It trades about 0.1 of its potential returns per unit of risk. Universal Electronics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 882.00 in Universal Electronics on August 31, 2024 and sell it today you would earn a total of 262.00 from holding Universal Electronics or generate 29.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hovnanian Enterprises vs. Universal Electronics
Performance |
| Timeline |
| Hovnanian Enterprises |
| Universal Electronics |
Hovnanian Enterprises and Universal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hovnanian Enterprises and Universal Electronics
The main advantage of trading using opposite Hovnanian Enterprises and Universal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hovnanian Enterprises position performs unexpectedly, Universal Electronics 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 Universal Electronics will offset losses from the drop in Universal Electronics' long position.| Hovnanian Enterprises vs. Taylor Morn Home | Hovnanian Enterprises vs. KB Home | Hovnanian Enterprises vs. MI Homes | Hovnanian Enterprises vs. Century Communities |
| Universal Electronics vs. LG Display Co | Universal Electronics vs. Vizio Holding Corp | Universal Electronics vs. Zepp Health Corp | Universal Electronics vs. Sonos Inc |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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