Correlation Between ReTo Eco and DR Horton

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

By analyzing existing cross correlation between ReTo Eco Solutions and DR Horton, you can compare the effects of market volatilities on ReTo Eco and DR Horton 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 ReTo Eco with a short position of DR Horton. Check out your portfolio center. Please also check ongoing floating volatility patterns of ReTo Eco and DR Horton.

Diversification Opportunities for ReTo Eco and DR Horton

0.8

Correlation Coefficient

ReTo Eco  DR Horton

Very poor diversification

The 3 months correlation between ReTo and DHI is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ReTo Eco Solutions and DR Horton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Horton and ReTo Eco 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 ReTo Eco Solutions are associated (or correlated) with DR Horton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Horton has no effect on the direction of ReTo Eco i.e., ReTo Eco and DR Horton go up and down completely randomly.

Pair Corralation between ReTo Eco and DR Horton

Given the investment horizon of 90 days ReTo Eco Solutions is expected to under-perform the DR Horton. In addition to that, ReTo Eco is 3.81 times more volatile than DR Horton. It trades about -0.04 of its total potential returns per unit of risk. DR Horton is currently generating about 0.05 per unit of volatility. If you would invest  10,753  in DR Horton on October 5, 2024 and sell it today you would earn a total of  3,236  from holding DR Horton or generate 30.09% return on investment over 90 days.

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

ReTo Eco Solutions  vs.  DR Horton

ReTo Eco Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReTo Eco Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DR Horton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with ReTo Eco and DR Horton

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

The idea behind ReTo Eco Solutions and DR Horton 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 Commodity Directory module to find actively traded commodities issued by global exchanges.