Correlation Between Beazer Homes and Dupont De

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

By analyzing existing cross correlation between Beazer Homes USA and Dupont De Nemours, you can compare the effects of market volatilities on Beazer Homes and Dupont De 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 Beazer Homes with a short position of Dupont De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Dupont De.

Diversification Opportunities for Beazer Homes and Dupont De

0.38

Correlation Coefficient

Beazer Homes  Dupont De

Weak diversification

The 3 months correlation between Beazer and Dupont is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Dupont De Nemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont De Nemours and Beazer 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 Beazer Homes USA are associated (or correlated) with Dupont De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont De Nemours has no effect on the direction of Beazer Homes i.e., Beazer Homes and Dupont De go up and down completely randomly.

Pair Corralation between Beazer Homes and Dupont De

Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.95 times more return on investment than Dupont De. However, Beazer Homes is 1.95 times more volatile than Dupont De Nemours. It trades about 0.06 of its potential returns per unit of risk. Dupont De Nemours is currently generating about 0.09 per unit of risk. If you would invest  2,800  in Beazer Homes USA on September 12, 2024 and sell it today you would earn a total of  260.00  from holding Beazer Homes USA or generate 9.29% return on investment over 90 days.

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

Beazer Homes USA  vs.  Dupont De Nemours

Beazer Homes USA

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Beazer Homes may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dupont De Nemours

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dupont De may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Beazer Homes and Dupont De

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

The idea behind Beazer Homes USA and Dupont De Nemours 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.