Correlation Between Beazer Homes and Virgin Wines

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

Diversification Opportunities for Beazer Homes and Virgin Wines

-0.68

Correlation Coefficient

Beazer Homes  Virgin Wines

Excellent diversification

The 3 months correlation between Beazer and Virgin is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK 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 Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of Beazer Homes i.e., Beazer Homes and Virgin Wines go up and down completely randomly.

Pair Corralation between Beazer Homes and Virgin Wines

Assuming the 90 days trading horizon Beazer Homes USA is expected to under-perform the Virgin Wines. In addition to that, Beazer Homes is 1.37 times more volatile than Virgin Wines UK. It trades about -0.08 of its total potential returns per unit of risk. Virgin Wines UK is currently generating about 0.23 per unit of volatility. If you would invest  3,300  in Virgin Wines UK on December 23, 2024 and sell it today you would earn a total of  1,620  from holding Virgin Wines UK or generate 49.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	77.78%
Values	Daily Returns

Beazer Homes USA  vs.  Virgin Wines UK

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 unsteady 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.

Virgin Wines UK

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Wines UK are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Virgin Wines unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Virgin Wines

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

The idea behind Beazer Homes USA and Virgin Wines UK 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.