Correlation Between Beazer Homes and NVR

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

Diversification Opportunities for Beazer Homes and NVR

0.84

Correlation Coefficient

Beazer Homes  NVR

Very poor diversification

The 3 months correlation between Beazer and NVR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and NVR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVR Inc 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 NVR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVR Inc has no effect on the direction of Beazer Homes i.e., Beazer Homes and NVR go up and down completely randomly.

Pair Corralation between Beazer Homes and NVR

Considering the 90-day investment horizon Beazer Homes is expected to generate 2.91 times less return on investment than NVR. In addition to that, Beazer Homes is 1.9 times more volatile than NVR Inc. It trades about 0.01 of its total potential returns per unit of risk. NVR Inc is currently generating about 0.04 per unit of volatility. If you would invest  756,956  in NVR Inc on October 22, 2024 and sell it today you would earn a total of  79,330  from holding NVR Inc or generate 10.48% return on investment over 90 days.

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

Beazer Homes USA  vs.  NVR Inc

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 latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

NVR Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Beazer Homes and NVR

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

The idea behind Beazer Homes USA and NVR Inc 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 CEOs Directory module to screen CEOs from public companies around the world.