Correlation Between Lennar and Consorcio ARA

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

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

Diversification Opportunities for Lennar and Consorcio ARA

-0.61

Correlation Coefficient

Lennar  Consorcio ARA

Excellent diversification

The 3 months correlation between Lennar and Consorcio is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and Consorcio ARA S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consorcio ARA S 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 Consorcio ARA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consorcio ARA S has no effect on the direction of Lennar i.e., Lennar and Consorcio ARA go up and down completely randomly.

Pair Corralation between Lennar and Consorcio ARA

Assuming the 90 days horizon Lennar is expected to under-perform the Consorcio ARA. But the stock apears to be less risky and, when comparing its historical volatility, Lennar is 1.31 times less risky than Consorcio ARA. The stock trades about -0.11 of its potential returns per unit of risk. The Consorcio ARA S is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Consorcio ARA S on December 30, 2024 and sell it today you would earn a total of  2.00  from holding Consorcio ARA S or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.38%
Values	Daily Returns

Lennar  vs.  Consorcio ARA S

Lennar

Risk-Adjusted Performance

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 basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Consorcio ARA S

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Consorcio ARA S are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Consorcio ARA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lennar and Consorcio ARA

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

The idea behind Lennar and Consorcio ARA S 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.