Correlation Between NVR and Paramount Resources

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

By analyzing existing cross correlation between NVR Inc and Paramount Resources, you can compare the effects of market volatilities on NVR and Paramount Resources 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 NVR with a short position of Paramount Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVR and Paramount Resources.

Diversification Opportunities for NVR and Paramount Resources

0.72

Correlation Coefficient

NVR  Paramount Resources

Poor diversification

The 3 months correlation between NVR and Paramount is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NVR Inc and Paramount Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Resources and NVR 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 NVR Inc are associated (or correlated) with Paramount Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Resources has no effect on the direction of NVR i.e., NVR and Paramount Resources go up and down completely randomly.

Pair Corralation between NVR and Paramount Resources

Considering the 90-day investment horizon NVR Inc is expected to generate 0.26 times more return on investment than Paramount Resources. However, NVR Inc is 3.88 times less risky than Paramount Resources. It trades about -0.13 of its potential returns per unit of risk. Paramount Resources is currently generating about -0.11 per unit of risk. If you would invest  827,678  in NVR Inc on December 20, 2024 and sell it today you would lose (100,193) from holding NVR Inc or give up 12.11% of portfolio value over 90 days.

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

NVR Inc  vs.  Paramount Resources

NVR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Paramount Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paramount Resources 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 nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NVR and Paramount Resources

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

The idea behind NVR Inc and Paramount Resources 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.