Correlation Between Beazer Homes and Caledonia Investments

Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments, you can compare the effects of market volatilities on Beazer Homes and Caledonia Investments 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 Caledonia Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Caledonia Investments.

Diversification Opportunities for Beazer Homes and Caledonia Investments

-0.86

Correlation Coefficient

Beazer Homes  Caledonia Investments

Pay attention - limited upside

The 3 months correlation between Beazer and Caledonia is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Caledonia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Investments 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 Caledonia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Investments has no effect on the direction of Beazer Homes i.e., Beazer Homes and Caledonia Investments go up and down completely randomly.

Pair Corralation between Beazer Homes and Caledonia Investments

Assuming the 90 days trading horizon Beazer Homes USA is expected to under-perform the Caledonia Investments. In addition to that, Beazer Homes is 3.63 times more volatile than Caledonia Investments. It trades about -0.07 of its total potential returns per unit of risk. Caledonia Investments is currently generating about 0.06 per unit of volatility. If you would invest  353,000  in Caledonia Investments on December 24, 2024 and sell it today you would earn a total of  14,000  from holding Caledonia Investments or generate 3.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	77.42%
Values	Daily Returns

Beazer Homes USA  vs.  Caledonia Investments

Beazer Homes USA

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Caledonia Investments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caledonia Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caledonia Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Beazer Homes and Caledonia Investments

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

The idea behind Beazer Homes USA and Caledonia Investments 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.