Correlation Between DR Horton and SEALED AIR

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

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

Diversification Opportunities for DR Horton and SEALED AIR

0.35

Correlation Coefficient

DR Horton  SEALED AIR

Weak diversification

The 3 months correlation between HO2 and SEALED is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding DR Horton and SEALED AIR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEALED AIR 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 SEALED AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEALED AIR has no effect on the direction of DR Horton i.e., DR Horton and SEALED AIR go up and down completely randomly.

Pair Corralation between DR Horton and SEALED AIR

Assuming the 90 days horizon DR Horton is expected to generate 2.0 times more return on investment than SEALED AIR. However, DR Horton is 2.0 times more volatile than SEALED AIR . It trades about 0.25 of its potential returns per unit of risk. SEALED AIR is currently generating about 0.23 per unit of risk. If you would invest  13,354  in DR Horton on October 23, 2024 and sell it today you would earn a total of  1,146  from holding DR Horton or generate 8.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

DR Horton  vs.  SEALED AIR

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SEALED AIR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SEALED AIR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SEALED AIR is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DR Horton and SEALED AIR

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

The idea behind DR Horton and SEALED AIR 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.