Correlation Between Landsea Homes and Canoo Holdings

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

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

Diversification Opportunities for Landsea Homes and Canoo Holdings

0.61

Correlation Coefficient

Landsea Homes  Canoo Holdings

Poor diversification

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

Pair Corralation between Landsea Homes and Canoo Holdings

Assuming the 90 days horizon Landsea Homes is expected to under-perform the Canoo Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Landsea Homes is 4.18 times less risky than Canoo Holdings. The stock trades about -0.38 of its potential returns per unit of risk. The Canoo Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.19  in Canoo Holdings on September 27, 2024 and sell it today you would earn a total of  0.13  from holding Canoo Holdings or generate 5.94% return on investment over 90 days.

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

Landsea Homes  vs.  Canoo Holdings

Landsea Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Landsea Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Canoo Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canoo Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Canoo Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Landsea Homes and Canoo Holdings

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

The idea behind Landsea Homes and Canoo Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.