Correlation Between Beazer Homes and Fresenius Medical

Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Fresenius Medical 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 Beazer Homes and Fresenius Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beazer Homes USA and Fresenius Medical Care, you can compare the effects of market volatilities on Beazer Homes and Fresenius Medical 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 Beazer Homes with a short position of Fresenius Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Fresenius Medical.

Diversification Opportunities for Beazer Homes and Fresenius Medical

0.74

Correlation Coefficient

Beazer Homes  Fresenius Medical

Poor diversification

The 3 months correlation between Beazer and Fresenius is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care and Beazer Homes 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 Beazer Homes USA are associated (or correlated) with Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Beazer Homes i.e., Beazer Homes and Fresenius Medical go up and down completely randomly.

Pair Corralation between Beazer Homes and Fresenius Medical

Assuming the 90 days trading horizon Beazer Homes USA is expected to under-perform the Fresenius Medical. In addition to that, Beazer Homes is 4.21 times more volatile than Fresenius Medical Care. It trades about -0.52 of its total potential returns per unit of risk. Fresenius Medical Care is currently generating about -0.19 per unit of volatility. If you would invest  4,558  in Fresenius Medical Care on October 10, 2024 and sell it today you would lose (166.00) from holding Fresenius Medical Care or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	50.0%
Values	Daily Returns

Beazer Homes USA  vs.  Fresenius Medical Care

Beazer Homes USA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Fresenius Medical Care

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fresenius Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Fresenius Medical

The main advantage of trading using opposite Beazer Homes and Fresenius Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, Fresenius Medical 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 Fresenius Medical will offset losses from the drop in Fresenius Medical's long position.

The idea behind Beazer Homes USA and Fresenius Medical Care 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.