Correlation Between Beazer Homes and Premier African

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

Diversification Opportunities for Beazer Homes and Premier African

-0.37

Correlation Coefficient

Beazer Homes  Premier African

Very good diversification

The 3 months correlation between Beazer and Premier is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Premier African Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier African Minerals 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 Premier African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier African Minerals has no effect on the direction of Beazer Homes i.e., Beazer Homes and Premier African go up and down completely randomly.

Pair Corralation between Beazer Homes and Premier African

Assuming the 90 days trading horizon Beazer Homes is expected to generate 2.74 times less return on investment than Premier African. But when comparing it to its historical volatility, Beazer Homes USA is 3.56 times less risky than Premier African. It trades about 0.2 of its potential returns per unit of risk. Premier African Minerals is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4.05  in Premier African Minerals on September 3, 2024 and sell it today you would earn a total of  1.40  from holding Premier African Minerals or generate 34.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.43%
Values	Daily Returns

Beazer Homes USA  vs.  Premier African Minerals

Beazer Homes USA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beazer Homes USA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Beazer Homes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Premier African Minerals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Premier African Minerals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Premier African unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Premier African

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

The idea behind Beazer Homes USA and Premier African Minerals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.