Correlation Between Lennar and NVR
Can any of the company-specific risk be diversified away by investing in both Lennar and NVR 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 NVR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennar and NVR Inc, you can compare the effects of market volatilities on Lennar and NVR 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 NVR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennar and NVR.
Diversification Opportunities for Lennar and NVR
Very weak diversification
The 3 months correlation between Lennar and NVR is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and NVR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVR Inc 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 NVR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVR Inc has no effect on the direction of Lennar i.e., Lennar and NVR go up and down completely randomly.
Pair Corralation between Lennar and NVR
Assuming the 90 days horizon Lennar is expected to generate 0.82 times more return on investment than NVR. However, Lennar is 1.22 times less risky than NVR. It trades about 0.14 of its potential returns per unit of risk. NVR Inc is currently generating about 0.08 per unit of risk. If you would invest 16,108 in Lennar on August 28, 2024 and sell it today you would earn a total of 702.00 from holding Lennar or generate 4.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lennar vs. NVR Inc
Performance |
| Timeline |
| Lennar |
| NVR Inc |
Lennar and NVR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennar and NVR
The main advantage of trading using opposite Lennar and NVR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennar position performs unexpectedly, NVR 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 NVR will offset losses from the drop in NVR's long position.| Lennar vs. Chuangs China Investments | Lennar vs. WisdomTree Investments | Lennar vs. REINET INVESTMENTS SCA | Lennar vs. Insurance Australia Group |
| NVR vs. Entravision Communications | NVR vs. Playtech plc | NVR vs. Spirent Communications plc | NVR vs. THORNEY TECHS LTD |
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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