Correlation Between Lennar and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Lennar and Dow Jones 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 Lennar and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennar and Dow Jones Industrial, you can compare the effects of market volatilities on Lennar and Dow Jones 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 Lennar with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennar and Dow Jones.
Diversification Opportunities for Lennar and Dow Jones
Good diversification
The 3 months correlation between Lennar and Dow is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Lennar 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 Lennar are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Lennar i.e., Lennar and Dow Jones go up and down completely randomly.
Pair Corralation between Lennar and Dow Jones
Assuming the 90 days trading horizon Lennar is expected to generate 2.67 times more return on investment than Dow Jones. However, Lennar is 2.67 times more volatile than Dow Jones Industrial. It trades about 0.11 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 97,777 in Lennar on August 30, 2024 and sell it today you would earn a total of 5,061 from holding Lennar or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Lennar vs. Dow Jones Industrial
Performance |
| Timeline |
Lennar and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Lennar
Pair trading matchups for Lennar
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Lennar and Dow Jones
The main advantage of trading using opposite Lennar and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennar position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.The idea behind Lennar and Dow Jones Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |