Correlation Between Beazer Homes and Skyline

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

Diversification Opportunities for Beazer Homes and Skyline

0.67

Correlation Coefficient

Beazer Homes  Skyline

Poor diversification

The 3 months correlation between Beazer and Skyline is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Skyline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline 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 Skyline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline has no effect on the direction of Beazer Homes i.e., Beazer Homes and Skyline go up and down completely randomly.

Pair Corralation between Beazer Homes and Skyline

Considering the 90-day investment horizon Beazer Homes USA is expected to under-perform the Skyline. In addition to that, Beazer Homes is 2.01 times more volatile than Skyline. It trades about -0.07 of its total potential returns per unit of risk. Skyline is currently generating about 0.37 per unit of volatility. If you would invest  9,706  in Skyline on September 12, 2024 and sell it today you would earn a total of  1,189  from holding Skyline or generate 12.25% return on investment over 90 days.

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

Beazer Homes USA  vs.  Skyline

Beazer Homes USA

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Beazer Homes is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Skyline

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skyline are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, Skyline showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Skyline

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

The idea behind Beazer Homes USA and Skyline 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.