Correlation Between LENNAR CORP and Lennar

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

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

Diversification Opportunities for LENNAR CORP and Lennar

0.94

Correlation Coefficient

LENNAR CORP  Lennar

Almost no diversification

The 3 months correlation between LENNAR and Lennar is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding LENNAR P B and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and LENNAR CORP 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 P B are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of LENNAR CORP i.e., LENNAR CORP and Lennar go up and down completely randomly.

Pair Corralation between LENNAR CORP and Lennar

Assuming the 90 days trading horizon LENNAR P B is expected to generate 1.08 times more return on investment than Lennar. However, LENNAR CORP is 1.08 times more volatile than Lennar. It trades about -0.01 of its potential returns per unit of risk. Lennar is currently generating about -0.03 per unit of risk. If you would invest  13,204  in LENNAR P B on October 13, 2024 and sell it today you would lose (904.00) from holding LENNAR P B or give up 6.85% of portfolio value over 90 days.

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

LENNAR P B  vs.  Lennar

LENNAR CORP

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with LENNAR CORP and Lennar

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

The idea behind LENNAR P B and Lennar 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.