Correlation Between Beazer Homes and Consolidated Communications

Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Consolidated Communications 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 Consolidated Communications 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 Consolidated Communications Holdings, you can compare the effects of market volatilities on Beazer Homes and Consolidated Communications 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 Consolidated Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Consolidated Communications.

Diversification Opportunities for Beazer Homes and Consolidated Communications

-0.43

Correlation Coefficient

Beazer Homes  Consolidated Communications

Very good diversification

The 3 months correlation between Beazer and Consolidated is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Consolidated Communications Ho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Communications 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 Consolidated Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Communications has no effect on the direction of Beazer Homes i.e., Beazer Homes and Consolidated Communications go up and down completely randomly.

Pair Corralation between Beazer Homes and Consolidated Communications

Assuming the 90 days trading horizon Beazer Homes is expected to generate 16.3 times less return on investment than Consolidated Communications. In addition to that, Beazer Homes is 4.35 times more volatile than Consolidated Communications Holdings. It trades about 0.0 of its total potential returns per unit of risk. Consolidated Communications Holdings is currently generating about 0.16 per unit of volatility. If you would invest  422.00  in Consolidated Communications Holdings on October 23, 2024 and sell it today you would earn a total of  26.00  from holding Consolidated Communications Holdings or generate 6.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	79.66%
Values	Daily Returns

Beazer Homes USA  vs.  Consolidated Communications Ho

Beazer Homes USA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Beazer Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Consolidated Communications

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Beazer Homes and Consolidated Communications

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

The idea behind Beazer Homes USA and Consolidated Communications Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.