Correlation Between Meritage and Dream Finders
Can any of the company-specific risk be diversified away by investing in both Meritage and Dream Finders 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 Dream Finders into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meritage and Dream Finders Homes, you can compare the effects of market volatilities on Meritage and Dream Finders 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 Dream Finders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meritage and Dream Finders.
Diversification Opportunities for Meritage and Dream Finders
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Meritage and Dream is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Meritage and Dream Finders Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Finders Homes 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 Dream Finders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Finders Homes has no effect on the direction of Meritage i.e., Meritage and Dream Finders go up and down completely randomly.
Pair Corralation between Meritage and Dream Finders
Considering the 90-day investment horizon Meritage is expected to generate 1.71 times less return on investment than Dream Finders. But when comparing it to its historical volatility, Meritage is 1.33 times less risky than Dream Finders. It trades about 0.02 of its potential returns per unit of risk. Dream Finders Homes is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,227 in Dream Finders Homes on November 9, 2024 and sell it today you would earn a total of 17.00 from holding Dream Finders Homes or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meritage vs. Dream Finders Homes
Performance |
| Timeline |
| Meritage |
| Dream Finders Homes |
Meritage and Dream Finders Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meritage and Dream Finders
The main advantage of trading using opposite Meritage and Dream Finders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meritage position performs unexpectedly, Dream Finders 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 Dream Finders will offset losses from the drop in Dream Finders' long position.| Meritage vs. TRI Pointe Homes | Meritage vs. MI Homes | Meritage vs. Beazer Homes USA | Meritage vs. Century Communities |
| Dream Finders vs. Hovnanian Enterprises | Dream Finders vs. Taylor Morn Home | Dream Finders vs. KB Home | Dream Finders vs. MI Homes |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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