Correlation Between PulteGroup and Sekisui House

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

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

Diversification Opportunities for PulteGroup and Sekisui House

0.59

Correlation Coefficient

PulteGroup  Sekisui House

Very weak diversification

The 3 months correlation between PulteGroup and Sekisui is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PulteGroup and Sekisui House Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui House and PulteGroup 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 PulteGroup are associated (or correlated) with Sekisui House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui House has no effect on the direction of PulteGroup i.e., PulteGroup and Sekisui House go up and down completely randomly.

Pair Corralation between PulteGroup and Sekisui House

Considering the 90-day investment horizon PulteGroup is expected to generate 1.6 times more return on investment than Sekisui House. However, PulteGroup is 1.6 times more volatile than Sekisui House Ltd. It trades about -0.04 of its potential returns per unit of risk. Sekisui House Ltd is currently generating about -0.07 per unit of risk. If you would invest  10,863  in PulteGroup on December 30, 2024 and sell it today you would lose (689.00) from holding PulteGroup or give up 6.34% of portfolio value over 90 days.

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

PulteGroup  vs.  Sekisui House Ltd

PulteGroup

Risk-Adjusted Performance

Very Weak

Over the last 90 days PulteGroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, PulteGroup is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sekisui House

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sekisui House Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sekisui House is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PulteGroup and Sekisui House

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

The idea behind PulteGroup and Sekisui House Ltd 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.