Correlation Between Cyrela Brazil and PulteGroup

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

By analyzing existing cross correlation between Cyrela Brazil Realty and PulteGroup, you can compare the effects of market volatilities on Cyrela Brazil and PulteGroup 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 Cyrela Brazil with a short position of PulteGroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cyrela Brazil and PulteGroup.

Diversification Opportunities for Cyrela Brazil and PulteGroup

-0.38

Correlation Coefficient

Cyrela Brazil  PulteGroup

Very good diversification

The 3 months correlation between Cyrela and PulteGroup is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cyrela Brazil Realty and PulteGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulteGroup and Cyrela Brazil 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 Cyrela Brazil Realty are associated (or correlated) with PulteGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulteGroup has no effect on the direction of Cyrela Brazil i.e., Cyrela Brazil and PulteGroup go up and down completely randomly.

Pair Corralation between Cyrela Brazil and PulteGroup

Assuming the 90 days horizon Cyrela Brazil Realty is expected to generate 3.18 times more return on investment than PulteGroup. However, Cyrela Brazil is 3.18 times more volatile than PulteGroup. It trades about 0.15 of its potential returns per unit of risk. PulteGroup is currently generating about -0.04 per unit of risk. If you would invest  274.00  in Cyrela Brazil Realty on December 30, 2024 and sell it today you would earn a total of  156.00  from holding Cyrela Brazil Realty or generate 56.93% return on investment over 90 days.

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

Cyrela Brazil Realty  vs.  PulteGroup

Cyrela Brazil Realty

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cyrela Brazil Realty are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Cyrela Brazil showed solid returns over the last few months and may actually be approaching a breakup point.

PulteGroup

Risk-Adjusted Performance

Very Weak

Over the last 90 days PulteGroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, PulteGroup is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cyrela Brazil and PulteGroup

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

The idea behind Cyrela Brazil Realty and PulteGroup 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.