Correlation Between Armada Hflr and LENNAR P

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

By analyzing existing cross correlation between Armada Hflr Pr and LENNAR P B, you can compare the effects of market volatilities on Armada Hflr and LENNAR P 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 Armada Hflr with a short position of LENNAR P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and LENNAR P.

Diversification Opportunities for Armada Hflr and LENNAR P

0.48

Correlation Coefficient

Armada Hflr  LENNAR P

Very weak diversification

The 3 months correlation between Armada and LENNAR is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and LENNAR P B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENNAR P B and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with LENNAR P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENNAR P B has no effect on the direction of Armada Hflr i.e., Armada Hflr and LENNAR P go up and down completely randomly.

Pair Corralation between Armada Hflr and LENNAR P

Considering the 90-day investment horizon Armada Hflr is expected to generate 10.37 times less return on investment than LENNAR P. But when comparing it to its historical volatility, Armada Hflr Pr is 1.14 times less risky than LENNAR P. It trades about 0.01 of its potential returns per unit of risk. LENNAR P B is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,781  in LENNAR P B on September 23, 2024 and sell it today you would earn a total of  5,819  from holding LENNAR P B or generate 85.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.03%
Values	Daily Returns

Armada Hflr Pr  vs.  LENNAR P B

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

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

LENNAR P B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LENNAR P B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Armada Hflr and LENNAR P

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

The idea behind Armada Hflr Pr and LENNAR P B 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.