Correlation Between Beazer Homes and Global Fashion

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

Diversification Opportunities for Beazer Homes and Global Fashion

0.02
  Correlation Coefficient

Significant diversification

The 3 months correlation between Beazer and Global is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Global Fashion Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Fashion Group 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 Global Fashion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Fashion Group has no effect on the direction of Beazer Homes i.e., Beazer Homes and Global Fashion go up and down completely randomly.

Pair Corralation between Beazer Homes and Global Fashion

Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.01 times more return on investment than Global Fashion. However, Beazer Homes is 1.01 times more volatile than Global Fashion Group. It trades about -0.08 of its potential returns per unit of risk. Global Fashion Group is currently generating about -0.08 per unit of risk. If you would invest  3,000  in Beazer Homes USA on October 8, 2024 and sell it today you would lose (420.00) from holding Beazer Homes USA or give up 14.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Beazer Homes USA  vs.  Global Fashion Group

 Performance 
       Timeline  
Beazer Homes USA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Global Fashion Group 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Global Fashion Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Global Fashion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Beazer Homes and Global Fashion Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Beazer Homes and Global Fashion

The main advantage of trading using opposite Beazer Homes and Global Fashion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, Global Fashion 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 Global Fashion will offset losses from the drop in Global Fashion's long position.
The idea behind Beazer Homes USA and Global Fashion Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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