Correlation Between LANDSEA HOMES and Deutsche Wohnen

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

By analyzing existing cross correlation between LANDSEA HOMES P and Deutsche Wohnen SE, you can compare the effects of market volatilities on LANDSEA HOMES and Deutsche Wohnen 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 LANDSEA HOMES with a short position of Deutsche Wohnen. Check out your portfolio center. Please also check ongoing floating volatility patterns of LANDSEA HOMES and Deutsche Wohnen.

Diversification Opportunities for LANDSEA HOMES and Deutsche Wohnen

0.63

Correlation Coefficient

LANDSEA HOMES  Deutsche Wohnen

Poor diversification

The 3 months correlation between LANDSEA and Deutsche is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding LANDSEA HOMES P and Deutsche Wohnen SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Wohnen SE and LANDSEA 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 LANDSEA HOMES P are associated (or correlated) with Deutsche Wohnen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Wohnen SE has no effect on the direction of LANDSEA HOMES i.e., LANDSEA HOMES and Deutsche Wohnen go up and down completely randomly.

Pair Corralation between LANDSEA HOMES and Deutsche Wohnen

Assuming the 90 days horizon LANDSEA HOMES P is expected to under-perform the Deutsche Wohnen. In addition to that, LANDSEA HOMES is 1.8 times more volatile than Deutsche Wohnen SE. It trades about -0.15 of its total potential returns per unit of risk. Deutsche Wohnen SE is currently generating about -0.03 per unit of volatility. If you would invest  2,390  in Deutsche Wohnen SE on September 23, 2024 and sell it today you would lose (70.00) from holding Deutsche Wohnen SE or give up 2.93% of portfolio value over 90 days.

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

LANDSEA HOMES P  vs.  Deutsche Wohnen SE

LANDSEA HOMES P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Deutsche Wohnen SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Wohnen SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward 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 LANDSEA HOMES and Deutsche Wohnen

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

The idea behind LANDSEA HOMES P and Deutsche Wohnen SE 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.