Correlation Between Fluor and Lennar

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

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

Diversification Opportunities for Fluor and Lennar

-0.48

Correlation Coefficient

Fluor  Lennar

Very good diversification

The 3 months correlation between Fluor and Lennar is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fluor and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Fluor 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 Fluor 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 Fluor i.e., Fluor and Lennar go up and down completely randomly.

Pair Corralation between Fluor and Lennar

Assuming the 90 days trading horizon Fluor is expected to generate 1.81 times more return on investment than Lennar. However, Fluor is 1.81 times more volatile than Lennar. It trades about 0.07 of its potential returns per unit of risk. Lennar is currently generating about 0.06 per unit of risk. If you would invest  65,599  in Fluor on October 7, 2024 and sell it today you would earn a total of  32,928  from holding Fluor or generate 50.2% return on investment over 90 days.

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

Fluor  vs.  Lennar

Fluor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fluor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Fluor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Fluor and Lennar

The main advantage of trading using opposite Fluor and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fluor 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 Fluor 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.