Correlation Between Lennar and Fenbo Holdings
Can any of the company-specific risk be diversified away by investing in both Lennar and Fenbo Holdings 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 Fenbo Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennar and Fenbo Holdings Limited, you can compare the effects of market volatilities on Lennar and Fenbo Holdings 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 Fenbo Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennar and Fenbo Holdings.
Diversification Opportunities for Lennar and Fenbo Holdings
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lennar and Fenbo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and Fenbo Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fenbo Holdings 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 Fenbo Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fenbo Holdings has no effect on the direction of Lennar i.e., Lennar and Fenbo Holdings go up and down completely randomly.
Pair Corralation between Lennar and Fenbo Holdings
Considering the 90-day investment horizon Lennar is expected to generate 0.17 times more return on investment than Fenbo Holdings. However, Lennar is 5.81 times less risky than Fenbo Holdings. It trades about -0.08 of its potential returns per unit of risk. Fenbo Holdings Limited is currently generating about -0.13 per unit of risk. If you would invest 18,451 in Lennar on August 23, 2024 and sell it today you would lose (1,644) from holding Lennar or give up 8.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lennar vs. Fenbo Holdings Limited
Performance |
| Timeline |
| Lennar |
| Fenbo Holdings |
Lennar and Fenbo Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennar and Fenbo Holdings
The main advantage of trading using opposite Lennar and Fenbo Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennar position performs unexpectedly, Fenbo Holdings 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 Fenbo Holdings will offset losses from the drop in Fenbo Holdings' long position.The idea behind Lennar and Fenbo Holdings Limited 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.| Fenbo Holdings vs. SFL Corporation | Fenbo Holdings vs. United Guardian | Fenbo Holdings vs. World Houseware Limited | Fenbo Holdings vs. Eldorado Gold Corp |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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