Correlation Between Chuangs China and Beazer Homes

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

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

Diversification Opportunities for Chuangs China and Beazer Homes

0.0

Correlation Coefficient

Chuangs China  Beazer Homes

Pay attention - limited upside

The 3 months correlation between Chuangs and Beazer is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments 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 Chuangs China 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 Chuangs China Investments 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 Chuangs China i.e., Chuangs China and Beazer Homes go up and down completely randomly.

Pair Corralation between Chuangs China and Beazer Homes

Assuming the 90 days horizon Chuangs China Investments is expected to under-perform the Beazer Homes. In addition to that, Chuangs China is 1.69 times more volatile than Beazer Homes USA. It trades about -0.01 of its total potential returns per unit of risk. Beazer Homes USA is currently generating about 0.06 per unit of volatility. If you would invest  1,420  in Beazer Homes USA on October 22, 2024 and sell it today you would earn a total of  1,320  from holding Beazer Homes USA or generate 92.96% return on investment over 90 days.

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

Chuangs China Investments  vs.  Beazer Homes USA

Chuangs China Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chuangs China Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chuangs China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 nearly stable basic indicators, Beazer Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chuangs China and Beazer Homes

The main advantage of trading using opposite Chuangs China and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chuangs China 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 Chuangs China Investments 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..