Correlation Between Lennar and Rocky Brands
Can any of the company-specific risk be diversified away by investing in both Lennar and Rocky Brands 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 Rocky Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennar and Rocky Brands, you can compare the effects of market volatilities on Lennar and Rocky Brands 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 Rocky Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennar and Rocky Brands.
Diversification Opportunities for Lennar and Rocky Brands
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lennar and Rocky is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands 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 Rocky Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Brands has no effect on the direction of Lennar i.e., Lennar and Rocky Brands go up and down completely randomly.
Pair Corralation between Lennar and Rocky Brands
Considering the 90-day investment horizon Lennar is expected to generate 0.47 times more return on investment than Rocky Brands. However, Lennar is 2.12 times less risky than Rocky Brands. It trades about -0.02 of its potential returns per unit of risk. Rocky Brands is currently generating about -0.12 per unit of risk. If you would invest 18,156 in Lennar on August 30, 2024 and sell it today you would lose (746.00) from holding Lennar or give up 4.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lennar vs. Rocky Brands
Performance |
| Timeline |
| Lennar |
| Rocky Brands |
Lennar and Rocky Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennar and Rocky Brands
The main advantage of trading using opposite Lennar and Rocky Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennar position performs unexpectedly, Rocky Brands 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 Rocky Brands will offset losses from the drop in Rocky Brands' long position.The idea behind Lennar and Rocky Brands 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.| Rocky Brands vs. Vera Bradley | Rocky Brands vs. Steven Madden | Rocky Brands vs. Wolverine World Wide | Rocky Brands vs. Caleres |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |