Correlation Between Beazer Homes and Performance Food

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

Diversification Opportunities for Beazer Homes and Performance Food

0.08

Correlation Coefficient

Beazer Homes  Performance Food

Significant diversification

The 3 months correlation between Beazer and Performance is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food 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 Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Beazer Homes i.e., Beazer Homes and Performance Food go up and down completely randomly.

Pair Corralation between Beazer Homes and Performance Food

Assuming the 90 days trading horizon Beazer Homes USA is expected to under-perform the Performance Food. In addition to that, Beazer Homes is 2.01 times more volatile than Performance Food Group. It trades about -0.01 of its total potential returns per unit of risk. Performance Food Group is currently generating about 0.12 per unit of volatility. If you would invest  7,550  in Performance Food Group on October 24, 2024 and sell it today you would earn a total of  950.00  from holding Performance Food Group or generate 12.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Beazer Homes USA  vs.  Performance Food Group

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.

Performance Food

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Food Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Performance Food reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Performance Food

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

The idea behind Beazer Homes USA and Performance Food 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.