Correlation Between DR Horton and Peloton Interactive

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

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

Diversification Opportunities for DR Horton and Peloton Interactive

0.48

Correlation Coefficient

DR Horton  Peloton Interactive

Very weak diversification

The 3 months correlation between DHI and Peloton is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding DR Horton and Peloton Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peloton Interactive 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 Peloton Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peloton Interactive has no effect on the direction of DR Horton i.e., DR Horton and Peloton Interactive go up and down completely randomly.

Pair Corralation between DR Horton and Peloton Interactive

Considering the 90-day investment horizon DR Horton is expected to under-perform the Peloton Interactive. But the stock apears to be less risky and, when comparing its historical volatility, DR Horton is 2.68 times less risky than Peloton Interactive. The stock trades about -0.18 of its potential returns per unit of risk. The Peloton Interactive is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  732.00  in Peloton Interactive on December 4, 2024 and sell it today you would lose (29.00) from holding Peloton Interactive or give up 3.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

DR Horton  vs.  Peloton Interactive

DR Horton

Risk-Adjusted Performance

Very Weak

Over the last 90 days DR Horton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Peloton Interactive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peloton Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with DR Horton and Peloton Interactive

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

The idea behind DR Horton and Peloton Interactive 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.