Correlation Between United Homes and Country Garden

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

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

Diversification Opportunities for United Homes and Country Garden

-0.2

Correlation Coefficient

United Homes  Country Garden

Good diversification

The 3 months correlation between United and Country is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding United Homes Group and Country Garden Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Country Garden Holdings and United Homes 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 United Homes Group are associated (or correlated) with Country Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Country Garden Holdings has no effect on the direction of United Homes i.e., United Homes and Country Garden go up and down completely randomly.

Pair Corralation between United Homes and Country Garden

Considering the 90-day investment horizon United Homes is expected to generate 466.17 times less return on investment than Country Garden. But when comparing it to its historical volatility, United Homes Group is 3.36 times less risky than Country Garden. It trades about 0.0 of its potential returns per unit of risk. Country Garden Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  34.00  in Country Garden Holdings on October 11, 2024 and sell it today you would lose (16.00) from holding Country Garden Holdings or give up 47.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.45%
Values	Daily Returns

United Homes Group  vs.  Country Garden Holdings

United Homes Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Country Garden Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Country Garden Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Country Garden reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Homes and Country Garden

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

The idea behind United Homes Group and Country Garden Holdings 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.