Correlation Between Kaufman Broad and Lennar

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

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

Diversification Opportunities for Kaufman Broad and Lennar

-0.24

Correlation Coefficient

Kaufman Broad  Lennar

Very good diversification

The 3 months correlation between Kaufman and Lennar is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Kaufman Broad SA and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Kaufman Broad 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 Kaufman Broad SA 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 Kaufman Broad i.e., Kaufman Broad and Lennar go up and down completely randomly.

Pair Corralation between Kaufman Broad and Lennar

Assuming the 90 days horizon Kaufman Broad SA is expected to generate 0.86 times more return on investment than Lennar. However, Kaufman Broad SA is 1.16 times less risky than Lennar. It trades about 0.04 of its potential returns per unit of risk. Lennar is currently generating about -0.13 per unit of risk. If you would invest  3,190  in Kaufman Broad SA on December 27, 2024 and sell it today you would earn a total of  105.00  from holding Kaufman Broad SA or generate 3.29% return on investment over 90 days.

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

Kaufman Broad SA  vs.  Lennar

Kaufman Broad SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaufman Broad SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Kaufman Broad is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lennar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Kaufman Broad and Lennar

The main advantage of trading using opposite Kaufman Broad and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaufman Broad 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 Kaufman Broad SA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.