Correlation Between Dell Technologies and Lennar

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

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

Diversification Opportunities for Dell Technologies and Lennar

0.64

Correlation Coefficient

Dell Technologies  Lennar

Poor diversification

The 3 months correlation between Dell and Lennar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Dell Technologies 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 Dell Technologies are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Dell Technologies i.e., Dell Technologies and Lennar go up and down completely randomly.

Pair Corralation between Dell Technologies and Lennar

Assuming the 90 days trading horizon Dell Technologies is expected to under-perform the Lennar. But the stock apears to be less risky and, when comparing its historical volatility, Dell Technologies is 1.05 times less risky than Lennar. The stock trades about -0.12 of its potential returns per unit of risk. The Lennar is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  85,650  in Lennar on December 24, 2024 and sell it today you would lose (19,146) from holding Lennar or give up 22.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.83%
Values	Daily Returns

Dell Technologies  vs.  Lennar

Dell Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dell Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lennar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dell Technologies and Lennar

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

The idea behind Dell Technologies and Lennar 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.