Correlation Between Beazer Homes and Sociedad Química

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

Diversification Opportunities for Beazer Homes and Sociedad Química

-0.28

Correlation Coefficient

Beazer Homes  Sociedad Química

Very good diversification

The 3 months correlation between Beazer and Sociedad is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Sociedad Qumica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Qumica y 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 Sociedad Química. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Qumica y has no effect on the direction of Beazer Homes i.e., Beazer Homes and Sociedad Química go up and down completely randomly.

Pair Corralation between Beazer Homes and Sociedad Química

Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.09 times more return on investment than Sociedad Química. However, Beazer Homes is 1.09 times more volatile than Sociedad Qumica y. It trades about 0.01 of its potential returns per unit of risk. Sociedad Qumica y is currently generating about 0.0 per unit of risk. If you would invest  2,900  in Beazer Homes USA on October 24, 2024 and sell it today you would lose (200.00) from holding Beazer Homes USA or give up 6.9% of portfolio value over 90 days.

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

Beazer Homes USA  vs.  Sociedad Qumica y

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.

Sociedad Qumica y

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sociedad Qumica y are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sociedad Química may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Beazer Homes and Sociedad Química

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

The idea behind Beazer Homes USA and Sociedad Qumica y 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.