Correlation Between Beazer Homes and London Security

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

Diversification Opportunities for Beazer Homes and London Security

-0.49

Correlation Coefficient

Beazer Homes  London Security

Very good diversification

The 3 months correlation between Beazer and London is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc 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 London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of Beazer Homes i.e., Beazer Homes and London Security go up and down completely randomly.

Pair Corralation between Beazer Homes and London Security

Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 2.26 times more return on investment than London Security. However, Beazer Homes is 2.26 times more volatile than London Security Plc. It trades about 0.03 of its potential returns per unit of risk. London Security Plc is currently generating about -0.12 per unit of risk. If you would invest  3,202  in Beazer Homes USA on September 12, 2024 and sell it today you would earn a total of  54.00  from holding Beazer Homes USA or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	64.06%
Values	Daily Returns

Beazer Homes USA  vs.  London Security Plc

Beazer Homes USA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beazer Homes USA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Beazer Homes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

London Security Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days London Security Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Beazer Homes and London Security

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

The idea behind Beazer Homes USA and London Security Plc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.