Correlation Between PulteGroup and Meritage
Can any of the company-specific risk be diversified away by investing in both PulteGroup and Meritage 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 PulteGroup and Meritage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PulteGroup and Meritage, you can compare the effects of market volatilities on PulteGroup and Meritage 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 PulteGroup with a short position of Meritage. Check out your portfolio center. Please also check ongoing floating volatility patterns of PulteGroup and Meritage.
Diversification Opportunities for PulteGroup and Meritage
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PulteGroup and Meritage is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding PulteGroup and Meritage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meritage and PulteGroup 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 PulteGroup are associated (or correlated) with Meritage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meritage has no effect on the direction of PulteGroup i.e., PulteGroup and Meritage go up and down completely randomly.
Pair Corralation between PulteGroup and Meritage
Considering the 90-day investment horizon PulteGroup is expected to generate 0.94 times more return on investment than Meritage. However, PulteGroup is 1.07 times less risky than Meritage. It trades about 0.24 of its potential returns per unit of risk. Meritage is currently generating about 0.2 per unit of risk. If you would invest 10,889 in PulteGroup on October 20, 2024 and sell it today you would earn a total of 814.00 from holding PulteGroup or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
PulteGroup vs. Meritage
Performance |
| Timeline |
| PulteGroup |
| Meritage |
PulteGroup and Meritage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PulteGroup and Meritage
The main advantage of trading using opposite PulteGroup and Meritage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PulteGroup position performs unexpectedly, Meritage 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 Meritage will offset losses from the drop in Meritage's long position.The idea behind PulteGroup and Meritage pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Meritage vs. TRI Pointe Homes | Meritage vs. MI Homes | Meritage vs. Beazer Homes USA | Meritage vs. Century Communities |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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