Correlation Between Hovnanian Enterprises and Everus Construction

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

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

Diversification Opportunities for Hovnanian Enterprises and Everus Construction

0.88

Correlation Coefficient

Hovnanian Enterprises  Everus Construction

Very poor diversification

The 3 months correlation between Hovnanian and Everus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hovnanian Enterprises and Everus Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everus Construction and Hovnanian Enterprises 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 Hovnanian Enterprises are associated (or correlated) with Everus Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everus Construction has no effect on the direction of Hovnanian Enterprises i.e., Hovnanian Enterprises and Everus Construction go up and down completely randomly.

Pair Corralation between Hovnanian Enterprises and Everus Construction

Considering the 90-day investment horizon Hovnanian Enterprises is expected to generate 0.73 times more return on investment than Everus Construction. However, Hovnanian Enterprises is 1.37 times less risky than Everus Construction. It trades about -0.09 of its potential returns per unit of risk. Everus Construction Group is currently generating about -0.19 per unit of risk. If you would invest  13,395  in Hovnanian Enterprises on December 29, 2024 and sell it today you would lose (2,683) from holding Hovnanian Enterprises or give up 20.03% of portfolio value over 90 days.

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

Hovnanian Enterprises  vs.  Everus Construction Group

Hovnanian Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hovnanian Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Everus Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Everus Construction Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Hovnanian Enterprises and Everus Construction

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

The idea behind Hovnanian Enterprises and Everus Construction Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.