Correlation Between Meritage and Hovnanian Enterprises
Can any of the company-specific risk be diversified away by investing in both Meritage and Hovnanian Enterprises 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 Hovnanian Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meritage and Hovnanian Enterprises, you can compare the effects of market volatilities on Meritage and Hovnanian Enterprises 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 Hovnanian Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meritage and Hovnanian Enterprises.
Diversification Opportunities for Meritage and Hovnanian Enterprises
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Meritage and Hovnanian is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Meritage and Hovnanian Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hovnanian Enterprises 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 Hovnanian Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hovnanian Enterprises has no effect on the direction of Meritage i.e., Meritage and Hovnanian Enterprises go up and down completely randomly.
Pair Corralation between Meritage and Hovnanian Enterprises
Considering the 90-day investment horizon Meritage is expected to under-perform the Hovnanian Enterprises. But the stock apears to be less risky and, when comparing its historical volatility, Meritage is 1.24 times less risky than Hovnanian Enterprises. The stock trades about -0.07 of its potential returns per unit of risk. The Hovnanian Enterprises is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 17,640 in Hovnanian Enterprises on August 24, 2024 and sell it today you would lose (102.00) from holding Hovnanian Enterprises or give up 0.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meritage vs. Hovnanian Enterprises
Performance |
| Timeline |
| Meritage |
| Hovnanian Enterprises |
Meritage and Hovnanian Enterprises Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meritage and Hovnanian Enterprises
The main advantage of trading using opposite Meritage and Hovnanian Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meritage position performs unexpectedly, Hovnanian Enterprises 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 Hovnanian Enterprises will offset losses from the drop in Hovnanian Enterprises' long position.| Meritage vs. TRI Pointe Homes | Meritage vs. MI Homes | Meritage vs. Beazer Homes USA | Meritage vs. Century Communities |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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