Correlation Between Beazer Homes and Direxion Daily

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

Diversification Opportunities for Beazer Homes and Direxion Daily

-0.79

Correlation Coefficient

Beazer Homes  Direxion Daily

Pay attention - limited upside

The 3 months correlation between Beazer and Direxion is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Direxion Daily FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily FTSE 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 Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily FTSE has no effect on the direction of Beazer Homes i.e., Beazer Homes and Direxion Daily go up and down completely randomly.

Pair Corralation between Beazer Homes and Direxion Daily

Considering the 90-day investment horizon Beazer Homes USA is expected to under-perform the Direxion Daily. In addition to that, Beazer Homes is 1.27 times more volatile than Direxion Daily FTSE. It trades about -0.12 of its total potential returns per unit of risk. Direxion Daily FTSE is currently generating about 0.19 per unit of volatility. If you would invest  2,037  in Direxion Daily FTSE on December 29, 2024 and sell it today you would earn a total of  726.00  from holding Direxion Daily FTSE or generate 35.64% return on investment over 90 days.

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

Beazer Homes USA  vs.  Direxion Daily FTSE

Beazer Homes USA

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Direxion Daily FTSE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily FTSE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Direxion Daily

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

The idea behind Beazer Homes USA and Direxion Daily FTSE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.