Correlation Between Ecofin Global and Beazer Homes

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

By analyzing existing cross correlation between Ecofin Global Utilities and Beazer Homes USA, you can compare the effects of market volatilities on Ecofin Global and Beazer Homes 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 Ecofin Global with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofin Global and Beazer Homes.

Diversification Opportunities for Ecofin Global and Beazer Homes

0.26

Correlation Coefficient

Ecofin Global  Beazer Homes

Modest diversification

The 3 months correlation between Ecofin and Beazer is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ecofin Global Utilities and Beazer Homes USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazer Homes USA and Ecofin Global 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 Ecofin Global Utilities are associated (or correlated) with Beazer Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazer Homes USA has no effect on the direction of Ecofin Global i.e., Ecofin Global and Beazer Homes go up and down completely randomly.

Pair Corralation between Ecofin Global and Beazer Homes

Assuming the 90 days trading horizon Ecofin Global is expected to generate 3.1 times less return on investment than Beazer Homes. But when comparing it to its historical volatility, Ecofin Global Utilities is 3.28 times less risky than Beazer Homes. It trades about 0.03 of its potential returns per unit of risk. Beazer Homes USA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,202  in Beazer Homes USA on September 12, 2024 and sell it today you would earn a total of  54.00  from holding Beazer Homes USA or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	64.06%
Values	Daily Returns

Ecofin Global Utilities  vs.  Beazer Homes USA

Ecofin Global Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofin Global Utilities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Ecofin Global is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Beazer Homes USA

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beazer Homes USA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Beazer Homes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ecofin Global and Beazer Homes

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

The idea behind Ecofin Global Utilities and Beazer Homes USA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.