Correlation Between Lennar and Sekisui House

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

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

Diversification Opportunities for Lennar and Sekisui House

0.17

Correlation Coefficient

Lennar  Sekisui House

Average diversification

The 3 months correlation between Lennar and Sekisui is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and Sekisui House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui House 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 Sekisui House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui House has no effect on the direction of Lennar i.e., Lennar and Sekisui House go up and down completely randomly.

Pair Corralation between Lennar and Sekisui House

Considering the 90-day investment horizon Lennar is expected to under-perform the Sekisui House. But the stock apears to be less risky and, when comparing its historical volatility, Lennar is 1.76 times less risky than Sekisui House. The stock trades about -0.27 of its potential returns per unit of risk. The Sekisui House is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,435  in Sekisui House on December 1, 2024 and sell it today you would lose (220.00) from holding Sekisui House or give up 9.03% of portfolio value over 90 days.

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

Lennar  vs.  Sekisui House

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. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sekisui House

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sekisui House has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent 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.

Pair Trading with Lennar and Sekisui House

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

The idea behind Lennar and Sekisui House 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..