Correlation Between Lennar and PulteGroup,

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

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

Diversification Opportunities for Lennar and PulteGroup,

0.78

Correlation Coefficient

Lennar  PulteGroup,

Poor diversification

The 3 months correlation between Lennar and PulteGroup, is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and PulteGroup, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulteGroup, 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 PulteGroup,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulteGroup, has no effect on the direction of Lennar i.e., Lennar and PulteGroup, go up and down completely randomly.

Pair Corralation between Lennar and PulteGroup,

Assuming the 90 days trading horizon Lennar is expected to generate 1.39 times less return on investment than PulteGroup,. In addition to that, Lennar is 1.02 times more volatile than PulteGroup,. It trades about 0.07 of its total potential returns per unit of risk. PulteGroup, is currently generating about 0.1 per unit of volatility. If you would invest  34,952  in PulteGroup, on October 3, 2024 and sell it today you would earn a total of  37,052  from holding PulteGroup, or generate 106.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.4%
Values	Daily Returns

Lennar  vs.  PulteGroup,

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.

PulteGroup,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PulteGroup, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, PulteGroup, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lennar and PulteGroup,

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

The idea behind Lennar and PulteGroup, 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.