Correlation Between BARRATT DEVEL and Lennar

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

By analyzing existing cross correlation between BARRATT DEVEL UNSPADR2 and Lennar, you can compare the effects of market volatilities on BARRATT DEVEL and Lennar 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 BARRATT DEVEL with a short position of Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of BARRATT DEVEL and Lennar.

Diversification Opportunities for BARRATT DEVEL and Lennar

0.47

Correlation Coefficient

BARRATT DEVEL  Lennar

Very weak diversification

The 3 months correlation between BARRATT and Lennar is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding BARRATT DEVEL UNSPADR2 and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and BARRATT DEVEL 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 BARRATT DEVEL UNSPADR2 are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of BARRATT DEVEL i.e., BARRATT DEVEL and Lennar go up and down completely randomly.

Pair Corralation between BARRATT DEVEL and Lennar

Assuming the 90 days trading horizon BARRATT DEVEL UNSPADR2 is expected to under-perform the Lennar. In addition to that, BARRATT DEVEL is 1.08 times more volatile than Lennar. It trades about -0.07 of its total potential returns per unit of risk. Lennar is currently generating about -0.03 per unit of volatility. If you would invest  16,153  in Lennar on September 12, 2024 and sell it today you would lose (715.00) from holding Lennar or give up 4.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BARRATT DEVEL UNSPADR2  vs.  Lennar

BARRATT DEVEL UNSPADR2

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BARRATT DEVEL UNSPADR2 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lennar is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BARRATT DEVEL and Lennar

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

The idea behind BARRATT DEVEL UNSPADR2 and Lennar 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.