Correlation Between Green Brick and TRI Pointe

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

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

Diversification Opportunities for Green Brick and TRI Pointe

0.22

Correlation Coefficient

Green Brick  TRI Pointe

Modest diversification

The 3 months correlation between Green and TRI is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Green Brick Partners and TRI Pointe Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRI Pointe Homes and Green Brick 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 Green Brick Partners are associated (or correlated) with TRI Pointe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRI Pointe Homes has no effect on the direction of Green Brick i.e., Green Brick and TRI Pointe go up and down completely randomly.

Pair Corralation between Green Brick and TRI Pointe

Given the investment horizon of 90 days Green Brick Partners is expected to generate 0.94 times more return on investment than TRI Pointe. However, Green Brick Partners is 1.06 times less risky than TRI Pointe. It trades about 0.01 of its potential returns per unit of risk. TRI Pointe Homes is currently generating about -0.11 per unit of risk. If you would invest  5,747  in Green Brick Partners on December 23, 2024 and sell it today you would earn a total of  2.00  from holding Green Brick Partners or generate 0.03% return on investment over 90 days.

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

Green Brick Partners  vs.  TRI Pointe Homes

Green Brick Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Green Brick Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Green Brick is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

TRI Pointe Homes

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRI Pointe Homes 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 basic 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.

Pair Trading with Green Brick and TRI Pointe

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

The idea behind Green Brick Partners and TRI Pointe Homes 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.