Correlation Between TRI Pointe and Dutch Bros

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

By analyzing existing cross correlation between TRI Pointe Homes and Dutch Bros, you can compare the effects of market volatilities on TRI Pointe and Dutch Bros 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 TRI Pointe with a short position of Dutch Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRI Pointe and Dutch Bros.

Diversification Opportunities for TRI Pointe and Dutch Bros

-0.57

Correlation Coefficient

TRI Pointe  Dutch Bros

Excellent diversification

The 3 months correlation between TRI and Dutch is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding TRI Pointe Homes and Dutch Bros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dutch Bros and TRI Pointe 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 TRI Pointe Homes are associated (or correlated) with Dutch Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dutch Bros has no effect on the direction of TRI Pointe i.e., TRI Pointe and Dutch Bros go up and down completely randomly.

Pair Corralation between TRI Pointe and Dutch Bros

Considering the 90-day investment horizon TRI Pointe Homes is expected to under-perform the Dutch Bros. But the stock apears to be less risky and, when comparing its historical volatility, TRI Pointe Homes is 2.1 times less risky than Dutch Bros. The stock trades about -0.08 of its potential returns per unit of risk. The Dutch Bros is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,696  in Dutch Bros on October 22, 2024 and sell it today you would earn a total of  2,274  from holding Dutch Bros or generate 61.53% return on investment over 90 days.

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

TRI Pointe Homes  vs.  Dutch Bros

TRI Pointe Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRI Pointe Homes 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 basic 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.

Dutch Bros

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dutch Bros are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Dutch Bros unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRI Pointe and Dutch Bros

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

The idea behind TRI Pointe Homes and Dutch Bros 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.