Correlation Between Montana Technologies and DR Horton

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

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

Diversification Opportunities for Montana Technologies and DR Horton

-0.84

Correlation Coefficient

Montana Technologies  DR Horton

Pay attention - limited upside

The 3 months correlation between Montana and DHI is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Montana Technologies and DR Horton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Horton and Montana Technologies 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 Montana Technologies are associated (or correlated) with DR Horton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Horton has no effect on the direction of Montana Technologies i.e., Montana Technologies and DR Horton go up and down completely randomly.

Pair Corralation between Montana Technologies and DR Horton

Given the investment horizon of 90 days Montana Technologies is expected to under-perform the DR Horton. In addition to that, Montana Technologies is 3.64 times more volatile than DR Horton. It trades about -0.05 of its total potential returns per unit of risk. DR Horton is currently generating about 0.04 per unit of volatility. If you would invest  11,461  in DR Horton on October 3, 2024 and sell it today you would earn a total of  2,521  from holding DR Horton or generate 22.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	52.3%
Values	Daily Returns

Montana Technologies  vs.  DR Horton

Montana Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Montana Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Montana Technologies revealed solid returns over the last few months and may actually be approaching a breakup point.

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DR Horton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Montana Technologies and DR Horton

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

The idea behind Montana Technologies and DR Horton 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.