Correlation Between Meritage and Barratt Developments
Can any of the company-specific risk be diversified away by investing in both Meritage and Barratt Developments 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 Meritage and Barratt Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meritage and Barratt Developments PLC, you can compare the effects of market volatilities on Meritage and Barratt Developments 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 Meritage with a short position of Barratt Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meritage and Barratt Developments.
Diversification Opportunities for Meritage and Barratt Developments
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meritage and Barratt is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Meritage and Barratt Developments PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barratt Developments PLC and Meritage 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 Meritage are associated (or correlated) with Barratt Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barratt Developments PLC has no effect on the direction of Meritage i.e., Meritage and Barratt Developments go up and down completely randomly.
Pair Corralation between Meritage and Barratt Developments
Considering the 90-day investment horizon Meritage is expected to generate 1.0 times more return on investment than Barratt Developments. However, Meritage is 1.0 times more volatile than Barratt Developments PLC. It trades about 0.03 of its potential returns per unit of risk. Barratt Developments PLC is currently generating about -0.4 per unit of risk. If you would invest 18,284 in Meritage on August 26, 2024 and sell it today you would earn a total of 160.00 from holding Meritage or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meritage vs. Barratt Developments PLC
Performance |
| Timeline |
| Meritage |
| Barratt Developments PLC |
Meritage and Barratt Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meritage and Barratt Developments
The main advantage of trading using opposite Meritage and Barratt Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meritage position performs unexpectedly, Barratt Developments 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 Barratt Developments will offset losses from the drop in Barratt Developments' long position.| Meritage vs. TRI Pointe Homes | Meritage vs. MI Homes | Meritage vs. Beazer Homes USA | Meritage vs. Century Communities |
| Barratt Developments vs. Greystone Logistics | Barratt Developments vs. Mill City Ventures | Barratt Developments vs. Barksdale Resources Corp | Barratt Developments vs. Black Diamond Group |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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