Correlation Between Kaiser Aluminum and Beazer Homes
Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum 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 Kaiser Aluminum and Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and Beazer Homes USA, you can compare the effects of market volatilities on Kaiser Aluminum 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 Kaiser Aluminum with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and Beazer Homes.
Diversification Opportunities for Kaiser Aluminum and Beazer Homes
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kaiser and Beazer is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Beazer Homes go up and down completely randomly.
Pair Corralation between Kaiser Aluminum and Beazer Homes
Assuming the 90 days trading horizon Kaiser Aluminum is expected to generate 1.25 times less return on investment than Beazer Homes. But when comparing it to its historical volatility, Kaiser Aluminum is 1.56 times less risky than Beazer Homes. It trades about 0.17 of its potential returns per unit of risk. Beazer Homes USA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,900 in Beazer Homes USA on August 30, 2024 and sell it today you would earn a total of 380.00 from holding Beazer Homes USA or generate 13.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kaiser Aluminum vs. Beazer Homes USA
Performance |
| Timeline |
| Kaiser Aluminum |
| Beazer Homes USA |
Kaiser Aluminum and Beazer Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaiser Aluminum and Beazer Homes
The main advantage of trading using opposite Kaiser Aluminum and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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.| Kaiser Aluminum vs. SOFTBANK P ADR | Kaiser Aluminum vs. Commonwealth Bank of | Kaiser Aluminum vs. PKSHA TECHNOLOGY INC | Kaiser Aluminum vs. COMINTL BANK ADR1 |
| Beazer Homes vs. Sekisui Chemical Co | Beazer Homes vs. Superior Plus Corp | Beazer Homes vs. NMI Holdings | Beazer Homes vs. SIVERS SEMICONDUCTORS AB |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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