Correlation Between LENNAR CORP and Aedas Homes
Can any of the company-specific risk be diversified away by investing in both LENNAR CORP and Aedas Homes 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 CORP and Aedas Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LENNAR P B and Aedas Homes SA, you can compare the effects of market volatilities on LENNAR CORP and Aedas Homes 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 CORP with a short position of Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENNAR CORP and Aedas Homes.
Diversification Opportunities for LENNAR CORP and Aedas Homes
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LENNAR and Aedas is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding LENNAR P B and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA and LENNAR CORP 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 P B are associated (or correlated) with Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of LENNAR CORP i.e., LENNAR CORP and Aedas Homes go up and down completely randomly.
Pair Corralation between LENNAR CORP and Aedas Homes
Assuming the 90 days trading horizon LENNAR P B is expected to under-perform the Aedas Homes. In addition to that, LENNAR CORP is 1.13 times more volatile than Aedas Homes SA. It trades about -0.15 of its total potential returns per unit of risk. Aedas Homes SA is currently generating about 0.08 per unit of volatility. If you would invest 2,426 in Aedas Homes SA on October 12, 2024 and sell it today you would earn a total of 209.00 from holding Aedas Homes SA or generate 8.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LENNAR P B vs. Aedas Homes SA
Performance |
| Timeline |
| LENNAR CORP |
| Aedas Homes SA |
LENNAR CORP and Aedas Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LENNAR CORP and Aedas Homes
The main advantage of trading using opposite LENNAR CORP and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENNAR CORP position performs unexpectedly, Aedas Homes 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 Aedas Homes will offset losses from the drop in Aedas Homes' long position.| LENNAR CORP vs. Zoom Video Communications | LENNAR CORP vs. PULSION Medical Systems | LENNAR CORP vs. ecotel communication ag | LENNAR CORP vs. IMAGIN MEDICAL INC |
| Aedas Homes vs. Seven West Media | Aedas Homes vs. MCEWEN MINING INC | Aedas Homes vs. Townsquare Media | Aedas Homes vs. Forsys Metals 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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