Correlation Between Lennar and Diamondback Energy,

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

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

Diversification Opportunities for Lennar and Diamondback Energy,

0.66

Correlation Coefficient

Lennar  Diamondback Energy,

Poor diversification

The 3 months correlation between Lennar and Diamondback is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and Diamondback Energy, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback Energy, and Lennar 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 Lennar are associated (or correlated) with Diamondback Energy,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy, has no effect on the direction of Lennar i.e., Lennar and Diamondback Energy, go up and down completely randomly.

Pair Corralation between Lennar and Diamondback Energy,

Assuming the 90 days trading horizon Lennar is expected to under-perform the Diamondback Energy,. In addition to that, Lennar is 1.01 times more volatile than Diamondback Energy,. It trades about -0.14 of its total potential returns per unit of risk. Diamondback Energy, is currently generating about 0.07 per unit of volatility. If you would invest  48,830  in Diamondback Energy, on October 7, 2024 and sell it today you would earn a total of  4,018  from holding Diamondback Energy, or generate 8.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Lennar  vs.  Diamondback Energy,

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. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Diamondback Energy,

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamondback Energy, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Diamondback Energy, may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lennar and Diamondback Energy,

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

The idea behind Lennar and Diamondback Energy, 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.