Correlation Between Landsea Homes and American Realty

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

By analyzing existing cross correlation between Landsea Homes Corp and American Realty Investors, you can compare the effects of market volatilities on Landsea Homes and American Realty 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 Landsea Homes with a short position of American Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Landsea Homes and American Realty.

Diversification Opportunities for Landsea Homes and American Realty

0.44

Correlation Coefficient

Landsea Homes  American Realty

Very weak diversification

The 3 months correlation between Landsea and American is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Landsea Homes Corp and American Realty Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Realty Investors and Landsea Homes 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 Landsea Homes Corp are associated (or correlated) with American Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Realty Investors has no effect on the direction of Landsea Homes i.e., Landsea Homes and American Realty go up and down completely randomly.

Pair Corralation between Landsea Homes and American Realty

Given the investment horizon of 90 days Landsea Homes Corp is expected to under-perform the American Realty. But the stock apears to be less risky and, when comparing its historical volatility, Landsea Homes Corp is 1.05 times less risky than American Realty. The stock trades about -0.09 of its potential returns per unit of risk. The American Realty Investors is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,467  in American Realty Investors on December 30, 2024 and sell it today you would lose (345.00) from holding American Realty Investors or give up 23.52% of portfolio value over 90 days.

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

Landsea Homes Corp  vs.  American Realty Investors

Landsea Homes Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Landsea Homes Corp 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 technical and fundamental 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.

American Realty Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Realty Investors 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 quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Landsea Homes and American Realty

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

The idea behind Landsea Homes Corp and American Realty Investors 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.