Correlation Between DR Horton and Hurco Companies

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

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

Diversification Opportunities for DR Horton and Hurco Companies

0.21

Correlation Coefficient

DR Horton  Hurco Companies

Modest diversification

The 3 months correlation between DHI and Hurco is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding DR Horton and Hurco Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hurco Companies 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 Hurco Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hurco Companies has no effect on the direction of DR Horton i.e., DR Horton and Hurco Companies go up and down completely randomly.

Pair Corralation between DR Horton and Hurco Companies

Considering the 90-day investment horizon DR Horton is expected to generate 0.84 times more return on investment than Hurco Companies. However, DR Horton is 1.19 times less risky than Hurco Companies. It trades about 0.05 of its potential returns per unit of risk. Hurco Companies is currently generating about -0.02 per unit of risk. If you would invest  9,117  in DR Horton on September 29, 2024 and sell it today you would earn a total of  4,911  from holding DR Horton or generate 53.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

DR Horton  vs.  Hurco Companies

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 inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Hurco Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hurco Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with DR Horton and Hurco Companies

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

The idea behind DR Horton and Hurco Companies 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..