Correlation Between DR Horton and Hess

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

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

Diversification Opportunities for DR Horton and Hess

-0.56

Correlation Coefficient

DR Horton  Hess

Excellent diversification

The 3 months correlation between D1HI34 and Hess is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding DR Horton and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess and DR Horton 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 DR Horton are associated (or correlated) with Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of DR Horton i.e., DR Horton and Hess go up and down completely randomly.

Pair Corralation between DR Horton and Hess

Assuming the 90 days trading horizon DR Horton is expected to under-perform the Hess. In addition to that, DR Horton is 53.65 times more volatile than Hess Corporation. It trades about -0.12 of its total potential returns per unit of risk. Hess Corporation is currently generating about 0.16 per unit of volatility. If you would invest  37,818  in Hess Corporation on October 7, 2024 and sell it today you would earn a total of  106.00  from holding Hess Corporation or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.37%
Values	Daily Returns

DR Horton  vs.  Hess Corp.

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DR Horton 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 indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hess

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Hess is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DR Horton and Hess

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

The idea behind DR Horton and Hess Corporation 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.