Correlation Between Beazer Homes and Strategic Investments

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

Diversification Opportunities for Beazer Homes and Strategic Investments

0.18

Correlation Coefficient

Beazer Homes  Strategic Investments

Average diversification

The 3 months correlation between Beazer and Strategic is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments 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 Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of Beazer Homes i.e., Beazer Homes and Strategic Investments go up and down completely randomly.

Pair Corralation between Beazer Homes and Strategic Investments

Assuming the 90 days trading horizon Beazer Homes is expected to generate 1.33 times less return on investment than Strategic Investments. But when comparing it to its historical volatility, Beazer Homes USA is 1.85 times less risky than Strategic Investments. It trades about 0.05 of its potential returns per unit of risk. Strategic Investments AS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9.15  in Strategic Investments AS on October 23, 2024 and sell it today you would earn a total of  3.85  from holding Strategic Investments AS or generate 42.08% return on investment over 90 days.

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

Beazer Homes USA  vs.  Strategic Investments AS

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.

Strategic Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Investments AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Strategic Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Strategic Investments

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

The idea behind Beazer Homes USA and Strategic Investments AS 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.