Correlation Between Lennar and PulteGroup
Can any of the company-specific risk be diversified away by investing in both Lennar and PulteGroup 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 PulteGroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennar and PulteGroup, you can compare the effects of market volatilities on Lennar and PulteGroup 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 PulteGroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennar and PulteGroup.
Diversification Opportunities for Lennar and PulteGroup
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lennar and PulteGroup is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and PulteGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulteGroup 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 PulteGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulteGroup has no effect on the direction of Lennar i.e., Lennar and PulteGroup go up and down completely randomly.
Pair Corralation between Lennar and PulteGroup
Considering the 90-day investment horizon Lennar is expected to under-perform the PulteGroup. In addition to that, Lennar is 1.06 times more volatile than PulteGroup. It trades about -0.15 of its total potential returns per unit of risk. PulteGroup is currently generating about -0.06 per unit of volatility. If you would invest 12,814 in PulteGroup on November 1, 2024 and sell it today you would lose (963.00) from holding PulteGroup or give up 7.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lennar vs. PulteGroup
Performance |
| Timeline |
| Lennar |
| PulteGroup |
Lennar and PulteGroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennar and PulteGroup
The main advantage of trading using opposite Lennar and PulteGroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennar position performs unexpectedly, PulteGroup 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 PulteGroup will offset losses from the drop in PulteGroup's long position.The idea behind Lennar and PulteGroup 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.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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