Correlation Between Beazer Homes and Dream Finders

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

Diversification Opportunities for Beazer Homes and Dream Finders

0.44

Correlation Coefficient

Beazer Homes  Dream Finders

Very weak diversification

The 3 months correlation between Beazer and Dream is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Dream Finders Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Finders Homes 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 Dream Finders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Finders Homes has no effect on the direction of Beazer Homes i.e., Beazer Homes and Dream Finders go up and down completely randomly.

Pair Corralation between Beazer Homes and Dream Finders

Considering the 90-day investment horizon Beazer Homes USA is expected to generate 0.76 times more return on investment than Dream Finders. However, Beazer Homes USA is 1.32 times less risky than Dream Finders. It trades about 0.12 of its potential returns per unit of risk. Dream Finders Homes is currently generating about 0.06 per unit of risk. If you would invest  2,983  in Beazer Homes USA on September 4, 2024 and sell it today you would earn a total of  507.00  from holding Beazer Homes USA or generate 17.0% return on investment over 90 days.

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

Beazer Homes USA  vs.  Dream Finders Homes

Beazer Homes USA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beazer Homes USA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Beazer Homes demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Dream Finders Homes

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Finders Homes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical and fundamental indicators, Dream Finders may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Beazer Homes and Dream Finders

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

The idea behind Beazer Homes USA and Dream Finders Homes 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.