Correlation Between CAIRN HOMES and Beazer Homes

Can any of the company-specific risk be diversified away by investing in both CAIRN HOMES and Beazer Homes 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 CAIRN HOMES and Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CAIRN HOMES EO and Beazer Homes USA, you can compare the effects of market volatilities on CAIRN HOMES and Beazer Homes 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 CAIRN HOMES with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAIRN HOMES and Beazer Homes.

Diversification Opportunities for CAIRN HOMES and Beazer Homes

-0.31

Correlation Coefficient

CAIRN HOMES  Beazer Homes

Very good diversification

The 3 months correlation between CAIRN and Beazer is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding CAIRN HOMES EO and Beazer Homes USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazer Homes USA and CAIRN 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 CAIRN HOMES EO are associated (or correlated) with Beazer Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazer Homes USA has no effect on the direction of CAIRN HOMES i.e., CAIRN HOMES and Beazer Homes go up and down completely randomly.

Pair Corralation between CAIRN HOMES and Beazer Homes

Assuming the 90 days horizon CAIRN HOMES EO is expected to generate 0.78 times more return on investment than Beazer Homes. However, CAIRN HOMES EO is 1.27 times less risky than Beazer Homes. It trades about 0.1 of its potential returns per unit of risk. Beazer Homes USA is currently generating about -0.04 per unit of risk. If you would invest  204.00  in CAIRN HOMES EO on October 8, 2024 and sell it today you would earn a total of  32.00  from holding CAIRN HOMES EO or generate 15.69% return on investment over 90 days.

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

CAIRN HOMES EO  vs.  Beazer Homes USA

CAIRN HOMES EO

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CAIRN HOMES EO are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CAIRN HOMES reported solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CAIRN HOMES and Beazer Homes

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

The idea behind CAIRN HOMES EO and Beazer Homes USA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.