Correlation Between Southland Holdings and DHI

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

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

Diversification Opportunities for Southland Holdings and DHI

-0.62

Correlation Coefficient

Southland Holdings  DHI

Excellent diversification

The 3 months correlation between Southland and DHI is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Southland Holdings and DHI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHI Group and Southland Holdings 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 Southland Holdings are associated (or correlated) with DHI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHI Group has no effect on the direction of Southland Holdings i.e., Southland Holdings and DHI go up and down completely randomly.

Pair Corralation between Southland Holdings and DHI

Given the investment horizon of 90 days Southland Holdings is expected to under-perform the DHI. But the stock apears to be less risky and, when comparing its historical volatility, Southland Holdings is 1.65 times less risky than DHI. The stock trades about -0.01 of its potential returns per unit of risk. The DHI Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  177.00  in DHI Group on December 21, 2024 and sell it today you would lose (15.00) from holding DHI Group or give up 8.47% of portfolio value over 90 days.

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

Southland Holdings  vs.  DHI Group

Southland Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southland Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Southland Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

DHI Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Southland Holdings and DHI

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

The idea behind Southland Holdings and DHI Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.