Correlation Between CVB Financial and Lennar

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

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

Diversification Opportunities for CVB Financial and Lennar

-0.09

Correlation Coefficient

CVB Financial  Lennar

Good diversification

The 3 months correlation between CVB and Lennar is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding CVB Financial Corp and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and CVB Financial 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 CVB Financial Corp 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 CVB Financial i.e., CVB Financial and Lennar go up and down completely randomly.

Pair Corralation between CVB Financial and Lennar

Assuming the 90 days horizon CVB Financial is expected to generate 2.46 times less return on investment than Lennar. In addition to that, CVB Financial is 1.41 times more volatile than Lennar. It trades about 0.01 of its total potential returns per unit of risk. Lennar is currently generating about 0.05 per unit of volatility. If you would invest  9,314  in Lennar on October 24, 2024 and sell it today you would earn a total of  3,744  from holding Lennar or generate 40.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

CVB Financial Corp  vs.  Lennar

CVB Financial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CVB Financial and Lennar

The main advantage of trading using opposite CVB Financial and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVB Financial 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 CVB Financial Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.