Correlation Between Lindsell Train and Beazer Homes

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

By analyzing existing cross correlation between Lindsell Train Investment and Beazer Homes USA, you can compare the effects of market volatilities on Lindsell Train and Beazer Homes 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 Lindsell Train with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lindsell Train and Beazer Homes.

Diversification Opportunities for Lindsell Train and Beazer Homes

-0.73

Correlation Coefficient

Lindsell Train  Beazer Homes

Pay attention - limited upside

The 3 months correlation between Lindsell and Beazer is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and Beazer Homes USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazer Homes USA and Lindsell Train 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 Lindsell Train Investment are associated (or correlated) with Beazer Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazer Homes USA has no effect on the direction of Lindsell Train i.e., Lindsell Train and Beazer Homes go up and down completely randomly.

Pair Corralation between Lindsell Train and Beazer Homes

Assuming the 90 days trading horizon Lindsell Train Investment is expected to generate 0.34 times more return on investment than Beazer Homes. However, Lindsell Train Investment is 2.96 times less risky than Beazer Homes. It trades about 0.2 of its potential returns per unit of risk. Beazer Homes USA is currently generating about -0.2 per unit of risk. If you would invest  72,400  in Lindsell Train Investment on December 1, 2024 and sell it today you would earn a total of  13,900  from holding Lindsell Train Investment or generate 19.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	75.81%
Values	Daily Returns

Lindsell Train Investment  vs.  Beazer Homes USA

Lindsell Train Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lindsell Train exhibited solid returns over the last few months and may actually be approaching a breakup point.

Beazer Homes USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lindsell Train and Beazer Homes

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

The idea behind Lindsell Train Investment and Beazer Homes USA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.